Account validation isn’t just a box to check for compliance—it’s the foundation of trust in the payments ecosystem. As credit-push fraud surges and financial institutions face pressure to safeguard transactions, account validation has become a frontline defense to avoid money being sent out of accounts through ACH credits, wires, cards, and other instant and digital payments. This year, Nacha will roll out new monitoring rules intended to reduce the incidence of successful ACH fraud attempts and improve the recovery of funds after frauds have occurred.

That shift is forcing financial institutions to think differently about how they validate accounts and stay a step ahead of fraud. In a PaymentsJournal webinar, Charles Ellert, Associate Managing Director of ACH Network Development at Nacha, and Hugh Thomas, Lead Analyst, Commercial and Enterprise at Javelin Strategy and Research, unpacked what’s changing and shared how Phixius—Nacha’s secure payment information network to mitigate payment risk and for enabling accuracy of payment routing—is evolving to help organizations strengthen their fraud defenses.

Why Credit Push Fraud Is Growing

With the growth in electronic payments, there has also been an increase in the number of credit-push fraud schemes, including a frightful rise in business email compromise attacks. Between 2022 and 2024, an estimated $8.5 billion was lost to this type of fraud, according to the FBI’s Internet Crime Complaint Center (IC3).

When this occurs, ACH originators may struggle to verify account details. “When I was on a corporate side, that was a constant worry,” said Ellert. “The teams would spend hours verifying account details just to make sure a payment landed in the right account. It slowed things down and added significant cost, but it was the only way to be safe.”

How Account Validation Can Help

A single wrong digit can send a payment astray. That’s why modern account validation methods have become so valuable. They transform a manual, error-prone process into one that’s secure, fast, and reliable.

Account validation helps keep payment processes secure in several key ways. By verifying accounts from the outset, it reduces the need for exceptions and rework. It also speeds up onboarding for new vendors and customers, since processors no longer have to wait for manual confirmations. Perhaps most importantly, it protects brand reputations by preventing misdirected or fraudulent payments before they happen.

Organizations are now using validation data to improve everything from payment analytics to customer experience. What began as a compliance exercise has evolved into a broader operational strategy—one focused on building trust into every transaction, rather than simply checking a box.

“I was persistently struck by the variety of different ways that this type of validation work has been attempted in the past, doing a penny test or mailing a check in,” said Thomas. “There is a certain consistency that is a very broad need among B2B payers.”

Enter Phixius

Many financial institutions are evaluating their existing controls and looking for ways to step up their operational readiness. Phixius, an API-based platform that facilitates secure data exchange between account validation requesters with data responders, is one option helping ODFIs support compliance efforts while improving efficiency and reducing fraud exposure. More than just a tool for meeting new requirements, it’s a way for banks to get ahead of them.

Phixius is designed to support account validation and other payment-related needs without requiring sensitive information to be stored or transmitted through traditional channels. It is a powerful tool for improving payment integrity and operational efficiency, especially as institutions prepare for the 2026 fraud monitoring rules.

Phixius acts as a bridge between data requesters and responders, helping organizations validate account details in real time. This reduces fraud risk and streamlines onboarding—eliminating the need for transactions or micro-deposits or having the customer share their check.

“It’s a kind of one-size-fits-all,” said Thomas. “It gets you hooked into all the places you want to be in terms of understanding who you’re paying, it’s a repeatable process, and because it’s an API driven process, it’s an embeddable process.”

Requesters are seeing reduced fraud exposure, faster onboarding, and fewer exceptions. By validating account information in real time, they’re improving operational efficiency and embedding trust into the payment process from the start.

“I spoke to a corporate just the other day who was facing leakage of benefit payments to some of their former employees,” said Ellert. “Because of that, they got a new email and changed their bank account. No one validated that account name match or was associated with it. That is something where Phixius can come in and help validate that the payment information is correct before you submit it.”

Phixius is also uniquely positioned to help organizations rethink how they assess transaction risk. Payroll disbursements, for example, carry far greater risk than a $20 monthly bill payment—and pulling funds involves a completely different risk calculation than pushing them.

There are still untapped repositories of account data that can inform better decision-making. Phixius allows institutions to incorporate these data sources into their risk signals, gaining deeper insight into where funds are going and how to manage risk more effectively.

“Let’s say you get one questionable response,” said Ellert. “If you’re sending a big amount of money, maybe you want to check two or three more of them, and build that into your risk profile.”

Preparing for the Future

Phixius is evolving to address the growing complexity of account validation and fraud prevention for ACH and other payment types. Its capabilities are expanding to support broader validation needs—from onboarding new customers and verifying account ownership to reducing exceptions in both B2B and B2C payments. It’s scaling to support more credentialed participants and to integrate more deeply with financial institutions and service providers.

Looking ahead, Phixius aims to deliver secure, real-time data exchange that helps participants stay ahead of compliance requirements while improving operational efficiency and trust in payment processing. For financial institutions, the imperative is clear: waiting on account validation is no longer an option.

“It’s foundational,” said Ellert. “Start now, evaluate your current processes, explore trusted platforms like Phixius, and position your organization to not just comply, but to lead.”

The post Inside the Battle Against Credit-Push Fraud: What’s Changing appeared first on PaymentsJournal.

WEBINAR

Stablecoins and the Reinvention of Remittance

May 12, 2026

1:00 pm EDT

[contact-form-7]

What Does the Future of Remittance Look Like in a Stablecoin World?

Stablecoins are fundamentally changing how remittance companies compete—not just by making transfers faster and cheaper, but by enabling an entirely new business model.

Join us on May 12 as Ran “Goldi” Goldshtein, SVP of Payments and Network at Fireblocks, Luke Tuttle, Chief Product and Technology Officer at MoneyGram, and James Wester, Director of Cryptocurrency at Javelin Strategy & Research, explore how leading remittance providers are evolving beyond transaction processing into full-fledged financial platforms—capturing value when money arrives, sits, earns yield, and moves again.

In this webinar, you will gain insights into:

• How wallet infrastructure transforms remittance companies from transaction processors into financial hubs
• How wallet-based remittance boosts customers retention
• The technical capabilities required to compete in this new landscape
• How providers capture value between transactions with stablecoins

Our Presenters

Ran “Goldi” Goldshtein

SVP of Payments and Network

Luke Tuttle

Chief Product and Technology Officer

James Wester

Co-Head of Payments

The post Stablecoins and the Reinvention of Remittance appeared first on PaymentsJournal.

WEBINAR

The Payments Paradox: Racing Toward Real-Time While Running on Manual

April 28, 2026

1:00 pm EDT

[contact-form-7]

Can your operations keep up with the speed of modern payments?

Payments aren’t just changing, they’re accelerating in every direction. Transaction volumes are surging, new payment rails are gaining traction, and AI is rapidly becoming part of the core infrastructure. But behind that momentum, many organizations are feeling the pressure: manual workflows, disconnected data, complex integrations, and increasing regulatory demands are making it harder to keep up.

On April 28, join Nick Botha, Vice President of Payments and Retail Banking at Autorek and James Wester, Co-Head of Payments at Javelin Strategy & Research, for an in-depth discussion about what’s really fueling this transformation, where the biggest operational challenges are hiding, and how these dynamics will shape the future of payments in 2026 and beyond.

In this webinar, you will gain insights into:

• Why operational capabilities are struggling to keep pace with payment growth
• How fragmented data is creating hidden risks across the ecosystem
• Where AI is delivering value today—and where gaps in maturity still remain

Our Presenters

Nick Botha

Vice President of Payments

James Wester

Co-Head of Payments

The post The Payments Paradox: Racing Toward Real-Time While Running on Manual appeared first on PaymentsJournal.

Although new payments rails and formats continue to emerge, all signs point to ACH remaining the dominant payment network. In fact, volume on the network is expected to accelerate, placing a strain on many financial institutions’ longstanding payment infrastructures.

In a recent PaymentsJournal webinar, Finastra’s Radha Suvarna, Chief Product Officer, Payments and Mihail Duta, Director of Global Solution Consulting for Payments, along with James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the trends driving ACH adoption, the impact on banks’ systems, and why payments modernization has become essential in today’s financial services milieu.

Becoming Forward Compatible

The FedNow and RTP instant payments networks burst onto the scene, fueling speculation about the advent of real-time payments. However, even though these networks have been active for years, ACH continues to serve a critical set of use cases—such as bulk payments, payroll, and government disbursements—and is likely to do so for the foreseeable future.

A recent U.S. government mandate to eliminate paper check payments and adopt electronic disbursements will only drive even more volume to the network.

While this increase may not overwhelm banks’ systems immediately, the mandate signals several important implications: ACH as a payment method must be supported by banks for the long term with additional changes on the horizon.

“One thing that surprised a lot of folks in the payment space is the speed with which this mandate was put in place. The executive order was signed in March and it was in effect at the end of September,” Duta said. “The other question is, what’s going to happen next and how quickly is it going to be implemented? Today, I know about this mandate, but tomorrow there could be another that could throw off the capacity that I have left in my existing solution.”

This growing ACH volume, combined with the dynamic nature of the financial services landscape, highlight the urgent need for payments modernization—enabling financial institutions to adapt to changes with minimal disruption.

Unfortunately, many of the ACH platforms that banks rely on were built decades ago, are mainframe-based, brittle, and not forward-compatible. Maintaining these platforms and integrating with new channels—such as mobile, digital, or ERP systems—has become costly.

Perhaps more importantly, these legacy systems have stymied innovation.

“You have a situation where you have this very important payment method that serves very important use cases for corporates and consumers that will continue to grow, and it’s going to be around for the next decades,” Suvarna said. “However, on the flip side, the platforms are very old and legacy and it is critically important for the industry and for the banks and for the rest of us to come together and make them forward-compatible for the years to come.”

The Compelling Drivers

In addition to the external forces impacting ACH platforms, organizations must also consider compelling business drivers.

One key advantage of a modern platform is its ability to create more value for customers. Commercial clients often separate payments into different files, such as bulk payroll payments versus emergency payments, each requiring distinct routing. Modern platforms streamline these complex workflows, improving efficiency, and reducing errors.

“From a corporate customer perspective, if they could send a list of payments, and depending upon the execution date of the payment, they’re automatically parsed into appropriate rails. That would be the ideal experience, rather than the customer trying to figure out which rail the payment needs to go through,” Suvarna said.

“To deliver those enhanced customer experiences where we obfuscate the complexity of payments from the end customer, it is critically important that ACH is modernized,” he said.

Another important driver is the resiliency that modern payments platforms deliver. While disaster recovery is a critical component of this resiliency, cloud-based third-party platforms offer additional benefits, including scalability and flexibility as payment volumes increase.

Finally, forward compatibility has become essential for financial services companies. The payments industry has undergone a metamorphosis in recent years, driven by innovations like digital assets and real-time payments. Alongside these emerging payment types, new standards like the data-rich ISO 20022 payments protocol have rapidly become the international norm.

“Outside of ACH, most other rails in the U.S. are using ISO 20022,” Duta said. “What I hear more from customers—corporates especially—is asking for the ability of sending an ISO-formatted file that can be transformed and processed through ACH, and I can tell you that the legacy solutions can’t do that.”

“ACH doesn’t live on its own, it has to interact with other rails and ISO,” he said. “It’s a perfect example of how the need for modernization is now versus later, because ISO is present now. It’s going to continue to evolve, and customer expectations are going to continue to evolve. If my current ERP systems can only generate ISO files, I will expect my ACH solution to take in an ISO file and process it for ACH. Only a modern solution can accommodate that—the payments hub in most cases.”

Priority Number Three

Although more financial institutions recognize the need for these solutions, ACH modernization projects are still often relegated to the back burner.

“I think the problem with ACH is it just works so well and always has,” Wester said. “When you look at all the things that financial institutions must do when it comes to payments—whether it’s to connect to new rails, whether it’s to worry about new fraud—the problem with ACH is it always is the perpetual priority number three, where there is always a rotating number one and number two. You always have something that’s more important ahead of it.”

Despite the reliability of existing systems, ACH modernization can no longer be ignored. Fortunately, financial institutions now have solutions available to address these concerns.

Modern payments hubs can be tailored to the needs of businesses ranging from mid-market to enterprise. For mid-market companies, in particular, payments hubs can be transformative, allowing them to leverage the scalability and reliability of cloud-native software-as-a-service (SaaS) solutions.

This eliminates the need for organizations to build and maintain infrastructure themselves. When adjustments are required—whether due to changes in transaction volume or new regulatory requirements—these responsibilities fall under the SaaS provider.

Such advantages are prompting a shift in mindset across many institutions.

“Many years ago, mentioning the words ‘cloud’ and ‘payments’ in one sentence would have led to a very short conversation. Now it’s almost table stakes,” Duta said. “This way I can address the needs for increased volume, I can address the additional use cases that I need to deal with for my customers and I don’t need to worry about reliability.”

“ACH—even though it’s been present for a long time—doesn’t stay still,” he said. “New rules come into place; there are new proposals are out there. If you think of the fact that the Same Day ACH transaction amount has been increased and the fact that there is potentially an opportunity for another Same Day ACH window, all these things point to a modern ACH solution which is tied to a payment hub.”

The Latter Camp

In this landscape, financial institutions have increasingly fallen into two camps. One group has chosen to retain their core ACH processing systems, opting instead to modernize and build around them. While this approach carries relatively low risk in the near term, it doesn’t resolve the inherent challenges posed by mainframe-based monolithic platforms.

The other group is willing to migrate  from existing systems in search of forward-look capabilities.

“We at Finastra have a modern ACH platform which is built on microservices, it’s API-based, and scalable,” Suvarna said. “Just last month we took one very large US enterprise bank live, moving from the legacy platform to an API-based platform which is forward compatible. It’s cloud-native, therefore there’s connectivity to third parties and it’s going to be significantly simpler.”

“The other benefit is that ACH sits alongside of other clearings in the United States, which is RTP, FedNow, and Fedwire,” he said. “That brings an additional value proposition, a consistency of experience that each bank will have to make their own choices on, in terms of how important it is for them to modernize around ACH. When it comes to leaving ACH as-is or bringing ACH into the fold of overall payments modernization, we are seeing more banks on the latter side.”

The post ACH Is Thriving, and Banks Are Struggling to Keep Pace appeared first on PaymentsJournal.

Banks are racing to modernize their payments systems, as real-time payments surge and artificial intelligence begins to reshape every corner of the industry. What once seemed like a back-office upgrade is now a critical priority—one that can define customer relationships and market positioning.

In a PaymentsJournal Webinar, Scotty Perkins, Head of Product Management at ACI Worldwide, Tyler Pichach, Global Head of AI Strategy at Microsoft, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed what banks need to do to prepare for these changes—and the cost of falling behind.

Modernization Is Moving Quickly

A survey by ACI of 200 banks last year found that modernization is their top priority. Banks wants to bring new products to market more quickly and deliver innovative solutions to customers. True modernization goes beyond adding a new payment rail; it raises critical questions about readiness, cloud adoption, native architecture, risk management, and scalability.

Digital channels are advancing faster than payment cores can keep up. While momentum around APIs and cloud adoption is strong, execution remains uneven, varying significantly by region and use case.

AI further amplifies the urgency around modernization. Banks need to consider not only how AI will enhance the customer experience but also how it will optimize the back-office processes that underpin payments.

“Leveraging the new tools around AI, as well as understanding and rewriting code is a great place for folks to learn and for customers to understand how to use AI,” said Pichach.

Wester added: “It may be that one thing that hits everybody in the face and says, you really need to be doing a lot more to prepare for what’s to come.”

Smarter Payments, Smarter Banking

Selecting partners with a deep understanding of the payments space and strong credibility can be a vital first step. Partners who can leverage all payment types help prevent a fragmented infrastructure.

A single, cohesive infrastructure allows banks to deploy instant payments quickly and efficiently. It also creates opportunities to introduce new offerings, like FedNow and RTP, alongside wire and batch payments.

“What if yesterday a consumer was going to use debit rails for a payment and tomorrow they’re going to use FedNow instead?” said Perkins. “How does the bank cost effectively and operationally manage that transition and make it seamless for customers? That’s where you want to involve partners that have expertise in showing those historically different use cases, but using a common look and feel, with orchestration logic that can credibly manage those payment types.”

Building In Scalability and Resiliency

A cloud-native strategy cannot compromise scalability or resiliency when deploying new solutions. Dynamic scalability involves more than just handling traffic—it includes managing costs and expectations. For example, it eliminates the need for excessive on-premises infrastructure that must be over-provisioned to accommodate peak demand. There should never be any perception—by customers or the bank—that availability is limited.

Resiliency extends beyond uptime. It encompasses the ability to continue processing safely under stress, whether facing sudden spikes in volume, fraud attempts, or network outages.

“One of the things we talk about in modern payments is the idea that failure is inevitable,” said Pichach. “You want to design systems with the mantra that things are going to go down. We need to ensure that these always-on operational components can continue to work.”

The Risks of Missing Out

For decades, banks have relied on payment systems that, while reliable, are now showing their age. Legacy code and infrastructure are increasingly fragile, making outages, slow performance, and outright failures more likely. Maintaining COBOL applications and the layers of customization added over time is no longer just a technical challenge, it’s a strategic one.

At the same time, payments are accelerating. Real-time payments reduce reaction times, making fraud more difficult to detect and prevent. This accelerated pace requires not only payment systems but also operational systems that can respond as quickly as transactions happen.

“The next piece is really around customer trust,” said Pichach. “If you’re not highly available, if you do not have the right fraud controls, you’re going to lose customer trust. You’re going to erode your customers’ desire to participate with you as a bank in payments.”

Taking the First Steps

Modernization is more than just an infrastructure upgrade. It’s an opportunity to rethink what problems the organization is trying to solve—both internally, for operational efficiency, and externally, for customer experience.

Quick wins are important: reusable patterns that deliver tangible business benefits early build momentum and credibility for the broader transformation. And AI? It can help deliver these faster experiences.

Bank strategy leaders must ask themselves: where do we want to be in five years? Which trends should we embrace—whether it’s the shift from wire transfers to instant payments, or integrating stablecoins and crypto capabilities now emerging under the Genius Act?

The first step is adopting a platform that can evolve with the market, letting banks innovate quickly and compete with those already moving fast.

“We saw a very large firm earlier this week talk about getting a banking license in the U.S. to do lending,” said Pichach. “But all of them are coming to play, and banks are competing with a wider array of players. They need to be able to innovate, to be able to get new products to life.”

Looking Down the Road

Instant payments are just the beginning. Banks need resilient infrastructure and reliable data to scale them while staying compliant with anti-money laundering and other financial crime regulations.

“One additional trend that we at ACI see is the ability to use AI to interact with consumers,” said Perkins. “If I can use ISO 20022 to understand transaction histories and how and what consumer behavior looks like, it makes me much more able to provide meaningful experiences.”

For business, especially small ones, the goal is simple: serve their customers without worrying about payments. They want transactions to simply work. Banks and their partners are building toward that reality, but the journey is ongoing.

“We have seen so much change, and we have gotten to the point now where everybody feels sort of caught up,” said Wester. “But there is no catching up. There is only going to be continued change.”

The post Modernizing Payments: Tackling the Toughest Tech Challenges appeared first on PaymentsJournal.

At first glance, it looks like a simple return or a routine dispute. But behind many of these transactions is a growing problem often mischaracterized as friendly fraud—a form of first-party fraud that costs organizations significantly and is increasingly normalized by consumers.

Although it has sometimes been called friendly fraud, there is nothing benign about exploiting organizations’ returns processes. What’s even more troubling is that a growing number of consumers feel justified in not paying for products and services they have ordered and received.

However, much of the information that’s critical to combating first-party fraud is already at many banks’ fingertips.

In a recent PaymentsJournal podcast, Craig Agulnek, Vice President of Product Management at Quavo, Brady Harrison, Head of Strategy and Execution at Equifax, and Jennifer Pitt, Senior Fraud Analyst at Javelin Strategy & Research, discussed how financial institutions can identify this data and leverage it to embed first-party fraud defenses into their workflows.

From the Background to the Forefront

One of the challenges in addressing first-party fraud is that it encompasses a wide range of scenarios. For example, a customer may not recognize a valid transaction on their statement and dispute it in error. Conversely, first-party fraud can also be a coordinated effort by networks of bad actors who have identified and exploited vulnerabilities in a company’s systems.

While fraud operations are a constant thorn in organizations’ sides, what’s equally alarming is the broader consumer mindset.

“More people are feeling like, ‘It’s OK, I’ll just defraud this merchant,’” Harrison said. “Where we have inflation, cost of living, and other pressures, more folks feel like, ‘I don’t want to pay for this item.’ It’s not every order or even every attempt. I’ve had conversations with quick-service restaurants where it’s only ever the fifth order or the tenth order where folks are like, ‘I don’t want to pay for this.’”

Some consumers are more inclined to engage in this type of fraud when dealing with larger merchants they believe can more easily absorb the costs of fraudulent returns. Although a customer may feel that a low-dollar fraudulent return has little impact, these charges quickly add up.

“First-party fraud has moved from the background to being an issue at the forefront,” Agulnek said. “It makes up about 70% of all credit card fraud cases and it’s costing the industry $132 billion every year—so it’s not an edge case, it’s the majority of the problem.”

“What we’re seeing is fast acceleration,” he said. “In 2024, 79% of merchants reported experiencing first-party fraud, where in the prior year, it was just 34%. That kind of increase shows you it’s not slow moving. It’s a fast trend, one that catches wind very quickly when you think about social media impact and trends that are popular to gain additional funds or take advantage of the system.”

Untapped Data Sources

Rising customer expectations have exacerbated these issues. Today, consumers expect immediate responses and fast refunds with few questions asked, putting tremendous pressure on institutions to resolve disputes quickly.

As a result, institutions are dealing with significantly higher transaction volumes, elevated customer expectations, increased intentional abuse, and little room for error. Yet the same technologies that have raised these expectations can also benefit financial institutions. Better still, many institutions already have these capabilities at their disposal.

“Institutions have access to these data sources, but they may be siloed across their financial institution,” Agulnek said. “Claims history is the top one; a lot of banks and credit unions will look at disputes one at a time instead of seeing the pattern over months or even years. How often does someone file, how quickly do they file a dispute after a purchase, and is this repeat behavior across merchants or merchant types?”

Many organizations have access to rich behavioral data, such as sudden device changes, shifts in login behavior, and unusual account activity. While these signals often surface before a dispute is filed, they are rarely incorporated into the review process until a transaction has already reached the chargeback stage and fees have been incurred.

Moreover, contextual data from merchants and transactions is frequently underutilized. Certain merchant types, fulfillment models, and subscription behaviors introduce predictable friction points where first-party fraud is more likely to occur.

When organizations fail to leverage the risk signals embedded in these data sources, they are often left without clear guidance on how to respond.

“The challenging bit is that we’re not efficiently separating a true third-party dispute under the regular fraud and dispute programs, and this whole other thing that’s potentially being counted in that bucket,” Harrison said. “How can we separate friendly fraudsters—people who are abusing the system? That feedback is helpful for helping people come to the correct conclusion earlier.”

Stepping Out of the Sandbox

Even the institutions that excel at identifying risk signals within their own organizations are not immune to first-party fraud. More financial services companies are offering a wider range of products than ever before, which means organizations can no longer rely solely on data from within their own domains.

“I’m a big travel card person, so if you’re just looking at my DDA account, you might not have details about what my normal transaction spend is on my rewards credit card,” Harrison said. “Also, my wife and I share a credit card, so if you’re just looking at Brady’s dispute data, you may miss that most of the disputes are on his wife’s card, because that’s the card that gets used or gets stolen.”

With such a proliferation of products, painting a clear picture of an individual’s financial situation is often challenging. Institutions must account for additional factors such as a customer’s household, devices, and physical location to gain a more complete and accurate view.

“Those that live in the same household tend to have the same banking relationship, but then you look at modern day fintechs that have child-friendly financial-education-geared applications that are also banking applications,” Agulnek said. “How do you bring those together and do it in a secure way?”

“By leveraging the vast amount of data, you can see those links and bring them together,” he said. “You can start to breakdown the profile of the individual by seeing more of their holistic profile across different institutions.”

Sharing the Details

Although many financial institutions have been reluctant to share protected customer data, participation in the broader financial services ecosystem has become imperative. Bad actors, after all, gain an advantage by rapidly sharing data and tools across networks—an agility that banks can’t afford to ignore.

“You might have heard of the TikTok/Chase glitch that happened last year,” Pitt said. “Essentially, there was a viral social media post where somebody posted saying, ‘You can go to a Chase Bank ATM, put in any sort of check—whether it’s fake or if it’s an amount over the amount that you have in your account—and you can immediately get cash out.’”

“Chase was able to connect the dots pretty quickly and stop that, but these fraudsters then went on social media and said, ‘Chase Bank figured this out, let’s go to these other banks that haven’t figured it out yet,’” she said. “Unfortunately, there were several other banks that were hit with the same fraud. If they had been privy to this collaborative effort and this information sharing, they wouldn’t have been hit with that type of fraud.”

Along with data-sharing hesitations, other obstacles hinder the development of a unified financial services data solution, including the limitations of legacy technology systems and a complex regulatory and compliance environment.

Still, the escalating costs of first-party fraud make it untenable for organizations to keep data close to the vest.

“We hear disputes cost from $50 to hundreds of dollars to manage,” Harrison said. “If you look at it from that lens of, ‘How many of these disputes could I eliminate?’, it’s like, ‘How can I go find information outside of my individual institution with extra detail about that consumer or grabbing details about that individual event?’”

Avoiding the Overcorrection

It has become critical for institutions to implement measures to mitigate first-party fraud, as economic and retail challenges are likely to worsen before they improve. Persistent inflation, sustained consumer pressure, and the growing social acceptance of first-party fraud are expected to continue.

Despite these challenges, financial institutions should avoid responding by ratcheting up dispute controls to an unreasonable degree.

“If I have a dispute with a bank and they put me through the wringer on proving it wasn’t me and signing all these forms, that’s probably a one-time experience with that institution,” Harrison said. “We don’t need an overcorrection, it’s how can we sort and divine those transactions and events, separating good consumers who have a valid dispute from people who are abusing their rights to dispute a transaction.”

Identifying first-party fraud is particularly challenging, especially for smaller institutions. However, platforms like Quavo’s QFD® can maximize the value of data financial institutions already generate, connecting insights across transactions to reveal the bigger picture.

“That’s what our approach brings together,” Agulnek said. “QFD unifies the internal signals that matter, adding in cross-institution identity that makes those signals more meaningful. When you automate routine work and put intelligence at that point of decision, schemes can resolve cases faster and focus on what truly matters.”

“That speed directly drives higher card and account usage, more towards top-of-wallet, stronger account holder trust, and a more efficient and scalable operation—all wins for the financial institution and wins from their customer perspective as well,” he said.

The post Returns, Disputes, and the Rise of First-Party Fraud appeared first on PaymentsJournal.

Once the domain of luxury cardholders, metal cards have evolved into a global phenomenon. Ironically, one of the driving forces behind this momentum has been the rise of digital payments—prompting more consumers to seek out a tangible payment device that conveys prestige. A mix of cultural and behavioral factors is also fueling the worldwide demand for metal cards.

In a recent PaymentsJournal webinar, IDEMIA Secure Transactions’ Kate Eagle, Head of Growth and Innovation, Payment Services, and Hennie Duplessis, SVP of Payments Services, MEA, along with Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, discussed the drivers of metal card adoption across different markets and the lessons global issuers can draw from regional trends.

Singing the Right Song

The global metal card market has been growing at leaps and bounds. Although regional dynamics vary, several overarching trends are shaping the industry.

Competition has intensified as more players enter the space. The rise of fintechs, telcos, cryptocurrency wallets, and embedded finance providers has prompted many financial services companies to rethink their strategies.

Amid this surge in digital payment options, there has been ongoing debate about whether digital payments will eventually replace physical cards altogether. Yet rather than signaling the end of physical cards, this evolution has reshaped consumer preferences.

“The need to stand out and differentiate is becoming increasingly important because the competition is changing, and the competition is growing,” Eagle said. “The context is very different now. If you look at the digital influence in the world, metal cards have got the unique ability to go viral. If you go to Instagram and type in metal payment cards, it’s everything from unboxing experiences to talking about the perks that you get with certain cards.”

“Whether it’s the travel perks, the loyalty rewards, or the concierge services, these are all projecting an aspirational lifestyle,” she said. “It’s not just reflecting a high-net-worth or an ultra-high-net-worth lifestyle, but it’s singing the right song to the people that have got this aspirational lifestyle that want to be able to show off.”

While the appeal of metal cards is nearly universal, certain aspects resonate more strongly in specific markets. For instance, in many Middle Eastern countries, metal cards have long been associated with prestige and trust—qualities that hold particular importance for consumers in the region.

“Markets like the UAE, the Kingdom of Saudi Arabia, Qatar, Kuwait, all are incredibly competitive when it comes to payments,” Duplessis said. “These are complex, layered societies where financial needs and expectations differ quite a lot—not just by wealth—but also by things like cultural background, status, professions, religion, and lifestyle.”

“Over the last five to 10 years, banks in the region have become very sophisticated when it comes to how they segment their customers,” he said. “They’ve moved away from these wealth tiers to include things like behavior and digital adoption and different kinds of insights. It’s quite an interesting dynamic and we see a lot of potential going forward.”

Carrying Weight Across Markets

Outside of the Middle East, less traditional markets like Pakistan, Southeast Asia, and several African countries have also become key players in the metal card zeitgeist.

“Let’s look at Pakistan,” Duplessis said. “It’s a country with a high level of financial exclusion, but the payment landscape is being transformed by digital banks and telcos. For the traditional banks to stay relevant within this fast-moving digital landscape, the conventional banks are using metal cards to get back some traction on getting customers.”

“Even in this market where you see that it’s very much a digital-first market, the physical plunk factor still matters,” he said. “The sound and feel of a metal card when it hits the surface, it does carry weight—literally and as a perception.”

In Southeast Asia, the tactile and premium feel of metal cards has been a major draw. Following the pandemic and its prolonged lockdowns, consumers in the region developed a strong appetite for tangible, sensory experiences, which has translated into growing demand for physical expressions of status and quality.

In Africa, the drivers have been quite different. Although the region is a diverse continent of over 50 countries, several overarching trends have shaped the rise of metal cards. It is home to one of the world’s youngest populations, with an average age well below many other regions. Urbanization continues to accelerate as more rural citizens move to cities, while rapid advances in digital infrastructure have further connected and empowered these young consumers.

Together, these factors have created a generation that is increasingly aspirational—seeking products and experiences that reflect both success and sophistication.

“These are all prime markets for standout metal cards that are coming bundled with rewards, tailored services, things that people can aspire to and show off,” Eagle said. “These are things they can share and use within their social media and for influencing, and for taking home to their families to show that they’ve achieved something in their lives.”

“It’s a significant shift away from metal cards just being for high-net-worth. It’s this targeted focus on segments that has been the key,” she said.

The One Piece of Real Estate

In contrast, card payments are the norm in the U.S., where credit and debit cards account for roughly $8 trillion in spending per year. Additionally, revolving credit card debt totals around $1.3 trillion, compounded by an average interest rate of 22%, creating a massive U.S. credit market.

This is the market where metal cards were born, and, in many cases, have become an expectation.

“For many of these high-net-worth people and those that are ultra-high, this is just table stakes,” Riley said. “This is what I expect out of a card, and I require it when I do business stuff. When you start looking at the development of luxury cards or high-ticket cards that exceed $300 and $400 in annual fees, that’s a basic core requirement. You don’t even think twice.”

Although metal cards are a core component of premium card offerings in the U.S., innovation in this space continues. There are now platforms that offer metal cards with various weights, compositions, and designs.

This personalization can have a dramatic impact in markets like the U.S., where physical card payments are prevalent. As consumers use their cards frequently, they develop a deeper connection with them.

“Payments are getting more digital every day, there’s no getting away from that fact, but the metal card holds a special place,” Duplessis said “There’s something powerful about this physical feel—the weight in your hands—and it signals trust, prestige, and belonging. It’s emotional; it’s not just functional.”

“Even if not entirely logical, many people still feel their money is somehow safer when there’s something tangible attached to it,” he said. “In a world where everything lives in the cloud, it’s that one piece of real estate that you have attached to the financial world.”

Because there are a range of reasons why global consumers are attracted to metal cards, financial institutions must consider these nuances when implementing their metal card strategies.

“What we’ve learnt over the years is that banks need to have flexibility in terms of what they can do with a metal card,” Eagle said. “What we’ve learnt is that we need to be able to offer a customizable metal card platform and not just a one-size-fits-all, where every metal card is the same composition with the same features.”

“Having this menu of things that you’re able to do with a metal card talks very well to the banks who want to be able to segment at a more granular level,” she said. “I’m in the UK, and we produce diamond-encrusted metal cards for royalty, and we have entry-level metal cards for the youth and aspirational segments. The point is that metal cards can serve many segments, not just the most privileged.”

The Origins of Money

One key lesson that financial institutions can take from global metal card adoption trends is the importance of customizability. Issuers should develop a portfolio that offers a variety of metal card designs, allowing them to differentiate between customer segments—from aspirational users to high-net-worth.

Financial services companies should take a tailored approach with the aspirational segment, which largely consists of younger consumers. These customers are more likely to join a waiting list and pay a premium for a distinctive metal card they can show off—especially if the card offers capabilities beyond traditional payments, such as digital or crypto functionality.

Rewards are another critical factor in the success of metal card programs. Banks should consider segmenting their loyalty offerings as well. For example, perks like fast-track concert tickets and concierge services may appeal to younger users, while older customers may prioritize air miles or cash-back rewards.

Banks that strike the right balance in their metal card programs can instill a sense of status, stability, and timelessness in their brands.

“It makes me think back to the origins of money, and what is a banknote?” Eagle said. “The original conception of a banknote was that it was a promise to pay. For me, that’s what (a metal card) is. It’s representing a promise—it’s a tangible link to your life savings or to your salary or to your ability to obtain credit and pay. it’s a promise to be able to live your life.”

“Everything the physical card represents is a lot more solid when it is, in fact, solid,” she said. “It’s a tangible direct link to the brand of the bank and the trust that we have in them, the promise that they are looking after our money safely, that they are going to pay, that they are going to back up all the things that we need to do in our daily lives. This is so important in this increasingly competitive financial services environment.”

The post Why More Global Consumers Are Aspiring to Unbox Metal Cards appeared first on PaymentsJournal.

WEBINAR

The Business Case for Payment Hub Modernization

March 10, 2026

1:00 pm EST

[contact-form-7]

Are legacy payment systems holding your business back?

In today’s digital economy, outdated payment systems can be costly to maintain, pose security risks, operate inefficiently with slow batch processing, and limit your ability to innovate.  

In this webinar, Scotty Perkins, Head of Product Management at ACI Worldwide, Tyler Pichach, Global Head of AI Strategy at Microsoft, and James Wester, Co-Head of Payments at Javelin Strategy & Research, will show how a modern payment hub can deliver measurable business value and a competitive edge.   

Stop viewing payments as a cost center. Discover how a modernized payment hub can become a driver of revenue, efficiency, and innovation. 

In this webinar, you will gain insights into:

• The top benefits for payment hub modernization
• Real-time payment readiness, preparing for FedNow and RTP expansion  
• Supporting instant payment rails and ISO 20022 messaging  
• Building scalability with cloud-native solutions  
• Enabling new revenue streams and business models  
• Accelerating digital transformation initiatives

Our Presenters

Scotty Perkins

Head of Product Management

Tyler Pichach

Global Head of AI Strategy

James Wester

Co-Head of Payments

The post The Business Case for Payment Hub Modernization appeared first on PaymentsJournal.

WEBINAR

How Consumer Insights Are Changing the Fight Against First-Party Fraud

February 18, 2026

1:00 pm EST

[contact-form-7]

How Can Banks Turn Disconnected Data Into Fraud Prevention?

First-party fraud continues to be one of the most complex and costly challenges facing the banking industry. As fraud tactics evolve and customer expectations rise, many institutions struggle with fragmented data, siloed teams, and slow decision-making. Yet, the most powerful tools to fight fraud are often already inside the organization—hidden in plain sight within existing consumer data.

Join us on February 18 as Craig Agulnek, VP of Product Management at Quavo, Brady Harrison, Head of Strategy & Execution at Equifax, and Jennifer Pitt, Senior Fraud Analyst at Javelin Strategy & Research explore how banks can turn disconnected information into actionable intelligence.

In this webinar, you will gain insights into:

• How to embed insights directly into fraud workflows
• How to build a unified, reliable source of truth across systems
• Real-world strategies that reduce losses, speed resolution times, and improve the customer experience

Our Presenters

Craig Agulnek

VP of Product Management

Brady Harrison

Head of Strategy & Execution

Jennifer Pitt

Senior Fraud Analyst

The post How Consumer Insights Are Changing the Fight Against First-Party Fraud appeared first on PaymentsJournal.

In an industry dominated by plastic, metal cards stand out. Their distinctive look, feel, and even sound have drawn in an emerging customer base that sees them as powerful symbols of status and stability. While often associated with affluent consumers, metal cards represent more than just a luxury novelty.

In a recent PaymentsJournal webinar, Amanda Gourbault, Chief Revenue Officer at CompoSecure, Vibhav Hathi, Co-Founder and Business Officer at FPL, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, examined the trends shaping metal cards, their diverse use cases across global markets, and the pivotal role they are poised to play in the future payments landscape.

A Dose of Dopamine

To better understand metal card trends, CompoSecure surveyed over 21,000 consumers across 17 markets. One key finding was that metal cards often make a profound psychological impact on consumers.

“People using a metal card feel valued when they use it,” Gourbault said. “They feel noticed, they feel respected, and those are fundamental human needs. Every time you pay with a metal card, you get another little dose of dopamine which makes you want to keep doing it again. That is one of the reasons why we found that—across all geographies, all segments—87% of respondents would prefer to have a metal card over a plastic card.”

Another reason consumers are drawn to metal cards is that they engage the senses, creating a more memorable and emotionally charged experience. The sleekness, heft, and even sound of a metal card can’t be replicated by plastic cards or mobile payments.

As the world becomes increasingly virtual, a metal card represents security, solidity and durability—qualities consumers have come to value.

This preference for metal cards makes customers more likely to engage with and stay loyal to metal card issuers. In a rapidly shifting industry where e-commerce and digital banking dominate, this can be a powerful advantage.

“As you get away from the retail bank, the credit card becomes your institution’s calling card,” Riley said. “That’s the foundation for a relationship. Establishing that relationship with the metal card adds that cachet and brings it through the whole relationship. Once you get that hook in, people get used to using it and they don’t want to give it up.”

Oftentimes, once consumers start using a metal card, their loyalty deepens and they evolve into brand advocates.

“We have had customers who have taken their metal card and sliced a birthday cake with it,” Hathi said. “They are bringing the card into every aspect of their life. We have so many of our consumers who will unbox the metal card and put it on social media and drive organic traffic to us.”

Tailoring Messaging to Distinct Consumer Segments

Even though there is a strong attraction to metal cards across the board, CompoSecure identified three segments where 90% of respondents said they would choose a metal card over a plastic card: elites, innovators, and up and coming.

A commonality among these segments is that they all prioritize the payment experience over functionality. While there are additional similarities, organizations should tailor their marketing messages to each group.

“When we talk about the elites, it’s not just the ultra-high net worth, although it’s certainly people with a certain wealth and social status,” Gourbault said. “But it also tends to be those who are interested in the arts, interested in social causes, it’s that group. And they respond to messaging around exclusivity, around prestige, and around scarcity.”

Innovators tend to be Gen Z or millennial consumers. Although these younger adults are digital natives, they are increasingly drawn to unique experiences—such as paying with a metal card. To reach innovators, organizations should craft messaging around themes such as trendsetting or even accessorizing.

The third segment consists of up-and-coming consumers, often referred to as HENRYs: High Earners, Not Rich Yet. Their priorities are desirability and aspiration, so companies should adjust their marketing efforts accordingly.

“Each of these three segments has differentiations, but the way they perceive and how they accept the metal card form factor as a differentiator for themselves is unique to them,” Hathi said. “All three feel that the metal elevates the credit card from an aspirational product to something well beyond that—from a rational transaction product to an emotional connection product.”

A Metal Card Pioneer

Just as metal cards can have different meanings for various segments of the population, premium cards can also be perceived differently across markets.

In the U.S., where there are roughly 660 million cards, metal cards are a compelling niche product. In a market like India, where much of the population lacks access to credit, the prestige of a metal card is far more pronounced.

“When we started working with banks to do something different in the credit card market, India was the country where—post the entire UPI and digital revolution—digital payments were the core,” Hathi said. “Consumption became the focus for a young Indian and therefore consumer credit. You add the lure of digital, and it was whatever you do as an innovator should only be virtual. Now, here comes an organization called FPL, and we’ll do a physical metal card.”

Although the company’s flagship product is a metal card, FPL is still a digital-first financial services company. Its goal was simply to bring a tangible experience to a mobile-first card. After an initial foray into a metal card with a high annual fee—a la Chase or American Express—FPL shifted course and offered a free metal card.

This strategy paid dividends and underscored a key aspect of the digital experience: even though consumers need the convenience and efficiency of digital payments, they still crave real world experiences. FPL leveraged this demand to stand out from a large pack.

“There are 45 cards in the industry. If I’m the 46th card enabler, how do I differentiate myself?” Hathi said. “I can go and compete with the large banks through my bank partners and say here’s a 25% discount, but that doesn’t make sense. Getting a metal card was an innovation, and even our detractors tell us, ‘Do not touch the metal card proposition.’ Metal is now a brand association for us across the entire segment.”

The Warship Card

Along with the payments experience, many metal card users increasingly look for purpose and sustainability in these products.

“What is the story behind it?” Hathi said. “There was a motorbike and cycle manufacturer, and there was a very prominent and large warship which was being retired after its time was done in the navy. What they did is they took the metal out of that ship, and they created their bike using that metal, and that became a collectible. What is the story behind my metal card versus your metal card?”

In addition to a card’s backstory, the type of metal can also entice some consumers. For example, Robinhood recently released metal cards made from 10-karat gold as an exclusive for certain members.

Alternatively, many consumers seek cards that are linked to charitable causes or sustainability initiatives, or that are created from recycled materials.

“It plays to a card that we made for American Express with Delta, where we made a card out of a retired 747,” Gourbault said. “In terms of recycling, we stripped off the fuselage and made it into something that we could create into a collectible.”

A Material That Resonates

Whatever its origins, metal has long resonated with consumers. For centuries, it has been used to forge tools, craft works of art, and both adorn and protect the human body.

Beyond its practical and aesthetic uses, metals have also served as one of the most widely recognized forms of currency across cultures worldwide. For these reasons, metal cards naturally convey value and prestige to consumers—making them a compelling differentiator for card issuers.

“It’s very important in conveying the brand and I’m sure it produces brand loyalty, but it’s not just about the perks, it’s about how the card makes you feel,” Gourbault said. “The experience of these customers where they’re unboxing and they’re cutting their birthday cake, it’s all about how you make them feel. When you do that well, it produces a great return on investment.”

The post Metal Card Magnitude: How a Premium Touch Can Enthrall High-Value Customers appeared first on PaymentsJournal.

As payment innovation accelerates, financial institutions are feeling the pressure. Legacy infrastructure, shifting regulation, and rising customer demand for real-time experiences are forcing banks to rethink how they deliver payments.

In response, payments as a service (PaaS) has emerged as the go-to model for cutting through complexity and speeding up transformation. James Wester, Co-Head of Payments for Javelin Strategy & Research, recently hosted a PaymentsJournal webinar that explored the benefits of PaaS and the challenge of choosing the right provider. Joining Wester were Deepak Gupta, EVP Product, Engineering & Services at Volante; Gregory Prince, Director Core Payments Product at Fifth Third Bank; and Alan Ng, Managing Director of Payments Technology Consulting at Accenture.

Removing the Pain Points

The key concept of PaaS is that it provides the technology enabling a bank or other organization to process its payments. The provider is responsible for creating that infrastructure, which could be cloud-based or on-premises but managed by the provider. In any case, PaaS delivers both the payment processing capabilities and the infrastructure, while the bank remains responsible for the business and operations.

“People know what software as a service is,” said Gupta. “Payment as a service is nothing but payment software as a service. At a very simple level, the provider removes all of the pain points which a bank has to worry about.”

For most banks, it does not make sense to build their own payment solutions—especially when providers like Volante have already delivered such services to multiple financial institutions. PaaS has emerged as the model for handling commoditized processing, allowing banks to expand their capacities and take advantage of the cloud.

PaaS presents itself as an alternative to custom payment solutions. When a new version of Oracle or SAP comes out, banks with custom payment processes must conduct a differential analysis to ensure compatibility with existing systems. Furthermore, when a customized payment system is built specifically for a bank’s needs, it misses out on the collective wisdom gained from the experiences of other organizations facing similar payment challenges.

“People said this is not the way software should be done,” said Gupta. “Software should be out-of-the-box. It should be configurable and scalable, and you shouldn’t have to worry about infrastructure. And that’s where software as a service came in.”

Catalysts for Change

The most obvious catalyst driving the shift from legacy technology to payments as a service has been modernization—the push from mainframe environments to something more up to date. The introduction of instant payments has accelerated this trend. Banks that began working with RTP and FedNow payments realized they needed a modern tech stack.

Another driver is ISO 20022 compliance, particularly protocols that create standards for the information sent with each payment. Financial institutions are already on that journey, implementing changes for the Federal Reserve and SWIFT, with the expectation of more industry shifts to come. Much of PaaS is already built on top of that data foundation.

Finally, there’s embedded payments. Fintechs are continously updating consumer experiences as they evolve and move further into real time. That shift becomes increasingly harder to achieve with a legacy tech stack.

The Challenge of Building Your Own

Creating a bespoke payment application presents its own challenges. Banks would rather focus on client relationships than on patching, upgrading, and maintaining their tech stack—but it’s easy for the latter to occupy much of their time.

“Go to any bank today and if you want to start a new project, IT’s book is filled for the next year, if not longer,” said Gupta. “If your head of business goes to IT and says, ‘Hey, when can you guys do it?’ Most often the answer is: ‘We can add it to our pipeline and start it next year.’ But you don’t have the luxury of waiting for two years, because customers are pushing to launch these new offerings.”

In addition, existing systems are not readily scalable. COVID-19 resulted in a surge in digital payments, as consumers shifted away from in-store purchases to online transactions. Systems could not scale quickly, and banks were reluctant to modify them for fear of breaking something. To complicate matters, many of the employees who originally built those systems are no longer available.

“To me and many of my clients, when we were contemplating the concept of payment as a service, that was the starting point,” said Ng. “I always use this metaphor: Do you dry clean your clothes yourself, or do you take them to a dry cleaner?”

Finding a Trusted Partner

For many financial institutions, payments modernization is uncharted territory. That’s why it’s important to choose partners with a proven track record.

“If you go with a vendor who does it for many other banks of different sizes, you’re already getting the world class infrastructure, security, resiliency, and performance, and you’re not paying for any of this,” said Gupta. “This is part of your basic fee, based on a per transaction basis.”

When evaluating providers, don’t just consider the number of customers they serve—look closely at their uptime. Availability should be near 100%, since the system must be accessible at all times. Security is equally important, as it protects proprietary data from compromised or sold on the black market.

Internally, have an honest discussion about which customizations the organization is prepared to support. Too often, financial institutions focus on customization for the sake of ownership. But if the solution effectively addresses the problem at hand, it’s better to embrace it rather than overcomplicate the process.

“There does not need to be 18 million different ways to process a transaction,” said Prince. “Make sure that you’re grounded on the problem that you’re trying to solve and not trying to customize just for the sake of customization. A lot of financial institutions get very passionate about the way they expect something to work because we have built these things around our own deficiencies. Sometimes we stand in the way of our own success.”

A Long and Happy Marriage

While PaaS is a major component in a payment modernization journey, it should not be equated with payment monetization. That expectation needs to be set across the organization—this is not a magic wand.

“We really need to stop thinking about payment modernization as an end goal,” said Wester. “You are not going to reach a point where you are suddenly modernized and that’s it.”

Gupta added: “When you’re choosing a software vendor in the payment space, you’re choosing for the next 10 or 20 years. It’s almost like dating: you can date with multiple vendors, but once you go to PaaS, you’re married. Anytime there’s an issue, you’re going to call the vendor and say, hey, my payment is stuck. What do I do with this?

“Don’t think of PaaS as a cheaper, better, faster option,” he said. “Think of PaaS as somebody you want to spend next 20 years with, because that’s what you’re going to be doing.”

The post Is Your Organization Ready for Payments as a Service? appeared first on PaymentsJournal.

Celebrating the holidays is still a top priority for consumers, but several factors make this season unique. Shoppers are balancing tighter budgets, adapting to a rapidly evolving digital landscape, and carrying ever-higher expectations. At the same time, many employers are grappling with how best to show appreciation to their teams.

In a recent PaymentsJournal webinar, BHN’s Director of Global Research, Sarah Kositzke, Head of Global Commerce, Brett Narlinger, and Head of Global Incentives, Jeff Haughton, along with Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the key forces shaping holiday shopping behavior, the influence of promotions and technology, and the central role gift cards are set to play.

The Impacts of Holiday-flation

One of the defining factors this season is the shifting economic environment. According to BHN’s 2025 holiday research, which tracked consumer sentiment throughout the year, price anxiety has risen sharply in recent weeks.

Rising costs for groceries, food, and utilities remain top concerns for most consumers, and these everyday pressures are directly influencing holiday shopping behavior.

“What we see is that about 13% of people are buying fewer gifts for fewer people this year,” Kositzke said. “When we asked why, there’s this notion (that) there is potentially less money, so there’s cautiousness and carefulness as it comes to increased costs that might be out there.”

“We’ve also seen some people mention that maybe it’s a shift from, ‘I used to give a gift for every single person,’ to now it might be more like a Secret Santa or a white elephant or draw a name out of a hat,” she said.

Even though shoppers are buying fewer gifts this holiday season, the number of gift exchanges is on the rise. Where once people may have only exchanged presents at family gatherings, many are now also participating in gift swaps at work, school, and other social groups.

This increase in occasions has pushed consumers to be more strategic with their budgets, fueling a shift toward gift cards—even in situations where a physical gift might once have been the preferred choice.

Shifting to gift cards has positive impacts for buyers. According to BHN’s research, roughly 74% of respondents said they bought gift cards because it helped them stick to their holiday budget, and more than half reported that buying a gift card reduced their financial stress.

Gift cards are also well-received by recipients. As economic conditions have tightened, more people now prefer gift cards that help offset everyday expenses. This has fueled growing demand for cards from grocery stores and big-box retailers like Walmart and Target. Additionally, many recipients are also seeking gift cards that support entertainment costs, like Netflix or HBO Max subscriptions.

While the macroeconomic environment is shaping holiday shopping behaviors, it hasn’t diminished consumers’ determination to enjoy the season.

“I heard a new term this morning: holiday-flation,” Narlinger said. “(Despite) the challenges and all the things that we’re worried about, there’s still a desire to have a lot of fun and have a holiday. So, how do I change my behavior? How do I stretch my dollar to get the most, given this holiday-flation moniker?”

Getting Out of Bed for Promotions

As consumers become more calculated and creative in their holiday purchases, strategic promotions can be a boon for businesses.

“What gets people out of bed to go shopping for the holidays?” Kositzke said. “Promotions do—sales, deals, anything that people gravitate toward. When we asked people after last holiday if they had leveraged any of these promotional opportunities, three-quarters said, ‘Yeah, we took advantage,’ and I think we’re going to start to see a lot of that again this year.”

Some of the most effective promotions include discounts on frequently purchased products, variations of the “buy one, get one” model, and the traditional use of coupons and price reductions.

Shoppers are discovering these deals through traditional channels such as word of mouth, in-store flyers, and email campaigns. However, younger consumers are increasingly turning to third-party platforms like social media and AI-powered chatbots, which they use to compare prices and gather personalized recommendations.

“There are two things that are happening,” Narlinger said. “One, you have a generation that’s like, ‘I’m not paying a dollar for a dollar; I want value; I want something more than that spend.’ The second is the continued use and evolution of technology to find better deals, whether it’s using AI or being able to use those frequent places where they can get discounts.”

Where Consumers Are Shopping

Along with shifts in how consumers shop, there are also continued changes in where they buy their gifts.

“What we find is that it’s equal for generations to be shopping in-store: 77% of younger people, 77% of older people,” Kositzke said. “Where we see a slight difference is that younger people do tend to be a bit more online than older people, but there is this notion of convenience and elements of being able to avoid the crowds, being open 24/7. We’re going to continue to see shifts to online, but it’s great to see that we’ve got a lot of people still shopping in-store.”

To avoid crowds, many shoppers are starting early. BHN’s research found that roughly a third of respondents have either already begun their holiday shopping or plan to do so before November. This is critical, as early shoppers typically spend 20% more on holiday gifts.

However, many shoppers also start early to stay within their budgets and take advantage of deals throughout the season. As a result, retailers should launch promotions early and maintain them throughout the holidays.

While most consumers still plan to shop in-store, retailers can’t afford to overlook their omnichannel strategies. E-commerce will continue to be a strong draw, especially for younger generations, but it is equally important for merchants to highlight digital gift cards.

“Try to get as many deals out there at the beginning to grab that customer and that brand share—but keep that drumbeat going,” Narlinger said. “Last year on December 23, we broke a record internally for us. Then did it again on the 24th, related to volume.”

“They may start in these early times, but they’re going to finish the day of, and we even did a tremendous amount of volume digitally on the 25th,” he said. “You’re going to need to have a strategy that understands that it’s the start all the way to the last procrastinator. It’s going to be critical because this is the most elongated holiday we’ve had in a long time.”

Avoiding Damaged Relationships Through Gift Cards

Although this holiday season is only one shopping day longer than last year, there are four full shopping weekends after Thanksgiving. This gives retailers an extended holiday window to leverage, which could pay off significantly.

“This is everybody’s most favorite and anticipated numbers for the holiday, and good news: they’re strong numbers,” Kositzke said. “We see that overall holiday gifting spending is rising, but the percentage that is being dedicated to gift cards is rising even more. Men are dedicating about 41% of their overall holiday gifting budget to gift cards—that’s up about 18% year over year. Women are at 36%, which is up about 5%.”

“One of the most interesting things was we took a look at people who are budgeting,” she said. “We asked a question, ‘Are you budgeting for this holiday season with gift spend?’ Of those who said ‘Yes,’ 43% of their dollars are dedicated to gift cards.”

When it comes to the type of gift cards recipients prefer, choice is the top priority. That’s why general-purpose cards, such as those from Visa and Mastercard, remain the most popular.

Beyond multipurpose cards, Gen Z consumers and women tend to gravitate toward beauty and wellness cards, while men show a stronger preference for video games. For boomers, dining out gift cards are often the go-to choice.

Regardless of demographic, there is a growing consensus among consumers: they are fed up with bad gifts. The three most common offenders are clothing that doesn’t fit, generic or impersonal items, and gifts that don’t suit the recipient’s lifestyle—like giving a bottle of wine to a non-drinker.

While many givers may feel that it’s the thought that counts, a poorly chosen gift can do far more harm than good.

“This is one of my new favorite findings,” Kositzke said. “We asked people to think about a time when a gift missed the mark and how does it make you feel about the person that sent you that gift? One in three relationships this holiday season have the chance to be damaged.”

“This is not good,” she said. “We do not want to have damaged relationships over holiday gifts because it does make people feel like ‘You don’t know me; you don’t understand who I am.’”

Making Employees Feel Valued

Unfortunately, many employers have also given poor gifts. Common mistakes include giving nothing at all or opting for impersonal items.

“It reminds me of a movie I know my family watches every year, which is Christmas Vacation, where Clark Griswold gets the Jelly of the Month Club,” Haughton said. “The worst thing an employer can do is not recognize or reward their employees at all, but a very close second is doing something that feels impersonal.”

“The reality is there’s a very simple way to give employees choice, let them make their selections for the needs that they want, and do it in a way that it’s at scale, it’s effective and it can feel very personal to those employees,” he said.

Some of the best choices for employer-provided gift cards are practical options, such as fuel, groceries, or everyday essentials. After practicality, employees appreciate having options, like those offered by multi-purpose gift cards.

Even a small touch of personalization can go a long way with employees—but finding the right balance can sometimes be challenging for employers.

“The concern sometimes with employers is, ‘Gosh, it’s a lot of work,’” Haughton said. “How do I do this at scale? How do I do something personal for an employee when we’ve got a lot of employees? The reality is, if you couple it with choice—prepaid cards or even a curated digital catalog of specific branded cards or multi-branded cards—there’s a lot of ways that you can get employees what they want.”

Extending the Holiday Season

There is a common thread when it comes to gift giving—a bad gift can strain a relationship, while the right one can leave a lasting impression.

“There’s a certain time of the year where employees look back at everything that they’ve worked so hard for,” Haughton said. “Get out in front of it, think about it early and often and then give them choice. If you do those things, it’s invaluable in terms of being able to recognize your employees.”

Similarly, the holiday season is a critical time for retailers. To make the most of it—and set their business up for success in the year ahead—they need a robust holiday plan and jam-packed promotional calendar.

“When you’re giving a gift card, the loading of the gift card and the giving of it starts the journey,” Hirschfield said. “The recipient getting it and having that self-use motivation is really what completes the journey and what extends the relationship. That gift is the first step of what can be a long-term relationship.”

“Those promotions don’t need to end because the holiday season is over,” he said. “The ability to provide additional benefit to that user continues through loyalty programs, through benefits, and through rewards. Keep thinking about, ‘How do we extend a successful holiday season into a successful 2026?’”

For more holiday insights and best practices, download BHN’s eBook, “Holiday Hearts, Tight Wallets.”

The post Unwrapping 2025: Why Gift Cards Still Top Holiday Wish Lists appeared first on PaymentsJournal.

There’s hardly a discussion about the future—of business, technology, or society—that doesn’t include artificial intelligence. With so much noise surrounding it, some may be tempted to dismiss AI as just hype. Yet, it has the potential to be the transformational innovation it’s promised to be—provided organizations have the right people, processes, and infrastructure in place.

In a recent PaymentsJournal webinar, Nick Botha, Global Payments Sales Manager at Autorek, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the state of AI in the payments industry, outlined a roadmap for companies still evaluating its role, and shared a new AI-powered playbook for financial institutions.

Two Lessons Ahead

As organizations of all shapes and sizes race to implement AI, many still struggle with too many unknowns. This is especially true in the financial services industry, where highly regulated institutions have concerns about privacy and bias issues that have been identified in AI.

Because of these concerns, many financial institutions have taken a cautious approach toward AI. This has created a new challenge: the fear that the organization is falling behind in implementing one of the most powerful technologies of recent decades.

“It reminds me of when I had to teach my kids algebra in eighth grade,” Wester said. “They came to me, and I was like, ‘I haven’t taken this in forever.’ So, I went online and found their text and I was always about two lessons ahead of them and they thought, ‘Wow, you really know a lot about algebra.’”

“There are a lot of people who claim expertise in this and say, ‘I know a lot about AI,’ but really they’re only about two lessons ahead of us on AI,” he said.

Though many institutions are likely not as far behind the curve as they think, some proven use cases for AI have already begun to emerge.

These include areas like detecting suspicious activity and streamlining onboarding processes like Know Your Customer checks. AI also excels at parsing vast amounts of data, making it highly effective for analyzing payments flows to identify opportunities for reducing fees.

In fact, many organizations are now moving from small-scale pilots to widescale implementations—a shift that is accelerating every day.

“It’s almost a bit of a revolution,” Botha said. “Like the internet revolution of maybe 30 years ago, where it went from a nice-to-have to a must-have. We’re getting to that stage where you see something being applicable to so many different industries in such a short space of time. It’s going to be interesting to see how the payments space adapts and adopts the key benefits of AI.”

The Name of the Game

To illuminate the current payments landscape, Autorek conducted a survey that highlighted a common theme: a persistent overreliance on legacy systems. Roughly 90% of respondents reported that they still depend on spreadsheets in the middle and back office.

“It’s not to say that Excel is not a brilliant tool, of course it is,” Botha said. “It’s just hard to understand how this can be considered an enterprise piece of software for payments operations. The reason I say that is because the name of the game in payments. And payments firms typically make their revenues through transaction volumes.”

“Processing very high volumes of data is really where these firms start to benefit, and working off spreadsheets and legacy systems can have a lot of limitations around scalability and flexibility,” he said.

Another issue is that once many organizations reach the limits of what spreadsheets can accomplish, many create additional processes around them to close the gap. These layers of process upon process only exacerbate functions that are already manual and labor-intensive.

One reason many institutions haven’t scrapped this model entirely is that they often don’t see the value in modernizing middle- and back-office processes.

“Instead of making some investments in the software and finding something that’s a better, more efficient way of doing things, it’s just, ‘Well, let’s solve this problem so we can get this box checked,’” Wester said. “We’ll just put in another process, or we’ll bring in one other person who can now add to that process.”

“We’ve been talking about all of the things that we’re going to invest in on the user experience and the front office for so long, and so much investment goes in there,” he said. “Yet, all of these processes that are underlying all of that and that are so important for payment companies just continue to be done on spreadsheets.”

Taking Practical Steps

Although many financial institutions are lagging in payments modernization and AI adoption, organizations exist at every stage of the journey. For those just beginning, there are concrete steps to move forward.

“It’s definitely not too late to start,” Botha said. “Some of those practical steps would be educating and training resources that you have today on how these things work and where they’re going to benefit your organization. In the future, what we’re going to find is that firms are going to be hiring a lot of individuals that have this experience and expertise, but that doesn’t mean that you can’t start somewhere within your organization.”

“I did see this interview some time ago, whereby they said it’s not going to be AI that replaces people’s jobs, it’s going to be people that know how to use AI that will be replacing people’s jobs,” he said. “That sits true with me.”

In addition to more robust training programs, organizations should explore incremental AI adoption across various parts of the business. Even small integrations can add up quickly, while also giving organizations the chance to fully understand how AI will affect their operations.

Partnering can also add significant value. For many financial services firms, building AI solutions in-house may not be feasible, making it essential to identify vendors and software providers that can deliver impact.

That said, introducing more third parties and systems can create challenges of its own.

“One of the key things that we find, especially with the inclusion of AI, is the interoperability between systems and partners,” Botha said. “When you are partnering, you’re making those investments, and they are typically very large investments. Just make sure that the interoperability between your systems and processes is there.”

“If you’re buying something that’s going to solve one particular issue, but it creates three or four other issues that sit around it because it doesn’t communicate effectively between different systems and processes and different business units—it’s actually going to create more of a headache,” he said.

The Nature of AI

Many well-run financial institutions may not see the value in rushing into AI implementation. While that may not be an issue now, the game-changing potential of artificial intelligence means organizations shouldn’t dismiss it out of hand.

“AI is transformational,” Wester said. “There is a lot that AI is going to do in financial services. One of the things that financial institutions and payment companies really need to do is be deliberate in the way that they’re looking at it. Don’t just dismiss it. Don’t take a wait and see attitude, understand that this is something that’s big.”

“Put together a team of people—put together the leadership team that’s going to say, ‘OK, where can we use this and where can we derive some benefit?’” he said.

Once an organization explores the benefits, it will often find they outweigh any concerns about AI. This makes now the time to take intentional steps toward implementation.

“The key messages over the last probably 18 months have been talks of AI, crypto, stablecoins, etc.,” Botha said. “In the payment space, it’s kind of at its infancy, so don’t feel like you’re terribly far behind. I haven’t seen many firms that are completely driven by AI within the payments space.”

“I don’t think that you would be terribly far behind if you started today, but if you start in 18 months to 24 months you may be, because it might move pretty quickly. That’s the nature of what AI has to offer.”

The post 2026 and Beyond: Charting the AI Roadmap in Payments appeared first on PaymentsJournal.

The modern financial landscape has created fertile ground for authorized push payment (APP) fraud, where victims are tricked into willingly transferring money under false pretenses. The expectation for real-time banking and instant payment settlement means transactions are often completed in seconds—leaving little room for reversal. Cross-border payments have become routine, even for everyday consumer purchases.

At the same time, advancements in artificial intelligence have made it easier for criminals to craft convincing scams. The FBI’s Internet Crime Complaint Center says losses from investment scams alone reached $4.57 billion in 2023 – up 38% from the year before. LSEG Risk Intelligence’s analysis shows that global APP fraud losses could reach $331 billion by 2027.

Addressing APP fraud requires a comprehensive approach, ranging from consumer education to advanced biometrics. In a PaymentsJournal webinar, Aravind Narayan, Global Director of Digital Identity and Fraud Proposition at LSEG Risk Intelligence,and Jennifer Pitt, Senior Analyst of Fraud Management at Javelin Strategy & Research, discussed the tools available to financial institutions to counter this growing threat.

Why the Problem Is Growing

Consumers no longer find it unusual when someone asks for a payment immediately. What was once a red flag now feels routine, thanks to the rise of instant payments. But once that money leaves an account, the transaction is typically irreversible—often completed in 10 seconds or less.

Digitally savvy consumers can buy and sell goods across borders with ease, but that global reach makes fraud more difficult to detect. Each country has its own regulatory framework, and cross-border transactions involve at least two jurisdictions. This complexity slows investigations and delays potential reimbursements.

The fight against fraud has also become more challenging with the rise of AI. Today, generative AI enables criminals to easily write well-constructed, convincing emails that appear to come from executives or trusted contacts.

On the consumer side, AI-assisted grandparent scams are also increasing. A few seconds of someone’s voice from social media or a video clip is enough to create deepfakes using widely available tools.

“The CFO of a company in Hong Kong called for an urgent meeting with his direct reports in a Zoom call,” said Narayan. “None of the six people on the call could detect that the individual posing as the CFO—who they all knew—was not actually the real person. It was a deepfake live video call. He told them the company has some financial challenges and needed to move to a different type of business, and urged them to send millions to his account.”

While this is an extreme example, these types of intra-business attacks are a real threat. Business Email Compromise (BEC) accounted for 21,489 complaints and $2.9 billion in reported losses in 2023.

Anytime an employee receives a message from someone claiming to be another employee and requesting a large sum of money, the company must have clear procedures in place that encourage questioning the request. It’s also recommended to implement a second layer of verification, especially for large transfers. If the person is seeking sensitive information, the breach could potentially lead to a much larger security issue.

Claiming Responsibility

In the UK, liability for these authorized transactions shared among the various financial institutions involved. In the U.S., it has typically fallen 100% on consumers, although that is starting to shift.

For example, Nacha—which oversees the ACH network—is implementing new rules that will require all non-consumer ACH participants to monitor for suspected fraud by mid-2026. This signals a move toward shared responsibility.

“When a scam starts with social media, the telecom may be able to stop fraud before it reaches that consumer,” said Pitt. “Instead of just saying the customer is 100% liable for everything that’s a scam, maybe we should share some of that liability with the bank or with the social media company. That will help build customer trust and let consumers know that you’re doing what you can to help them out.”

UK banks also place greater emphasis than their U.S. counterparts on consumer education to fight APP fraud.

“I recently had someone come over to do building work in my house,” said Narayan. “When I was sending them money, I got frustrated because I had to click seven times: Are you sure? Are you sure this is not a scam? Did you really know this account? Are you sending money to the right individuals? It’s frustrating, but at the same time it’s giving me a good assurance that they care about my money.”

Pushing Toward Stronger Identity Verification

Some businesses have begun implementing some type of verification, like age, as a first step. But the real opportunity lies in going further, using things such as identity verification and account verification intelligence so businesses truly know who they are transacting with. This kind of proactive verification can help prevent fraud rather than just reacting to it after the fact.

“You want to have sufficient measures of fraud prevention to make sure you know who is coming into your platform,” said Narayan. “Whether it’s Booking.com, Meta or Google, they should know who they are doing business with, because then they can share any sort of relationship and behavior attributes with a financial institution to prevent fraud before it happens.”

As it stands, too many financial service providers treat consumer education as a check-the-box exercise, simply posting content on their websites because regulators require it.

“I think that’s a really bad approach,” said Pitt. “A lot of businesses are worried about causing too much friction and losing their customers. But scammers frequently try to foster a sense of urgency: Act now or you won’t get your Social Security benefits, or something like that. This few seconds of asking ‘Are you sure?’ will essentially snap our brain out of that panicky feeling and help somebody avoid becoming a victim.”

Authorized, Not Voluntary

When talking about authorized push payment fraud, the key word is authorized, not voluntary. The victim authorizes the payment to the criminal’s account under the false belief that they are dealing with a legitimate recipient. Voluntary implies that someone is doing something of their free will.

“This terminology may sound like just wordplay, but it’s not,” said Pitt. “It is authorized because they made the transaction, but it is not voluntary. I’ve seen firsthand in jury trials how this terminology can actually affect the outcome of the case. Somebody can be found not guilty by a jury if the term authorized is used, even though it’s based on deception.”

Behavioral analytics could offer a promising solution to this problem. Is the victim showing signs of hesitation? Are they typing different than usual? Are they accessing their account in an unusual way? Recognizing these anomalous behaviors can help banks detect situations where a customer may be under coercion.

“Imagine being able to block a transaction because the bank sees that that individual has been on the phone for a longer time,” said Narayan. “That could mean somebody’s actually causing that individual to send money. They could stop that payment from happening because they’re monitoring that this individual is actually on the phone to a potential fraudster.”

In the future, it may be possible to anticipate these attacks and identify who the next frontier might be. The key is that no bank can do this alone. They need visibility into fraud occurring elsewhere to anticipate what might happen within their own organization.

A Layered Approach

Preventing fraud requires layering multiple authentication approaches, including biometrics, and triangulating these signals to pinpoint both the individual and the recipient of the payment.

“Fraud prevention is not one and done, and it’s not detection anymore,” said Narayan. “It’s not like one data point will actually prevent fraud from happening.”

A strong program requires constant monitoring and a multilayered authentication approach. With, say, a corporate treasury, you might onboard a supplier, then three months later there might be a scammer who got hold of the domain. If the treasurer emails and ask to change the account number from X to Y it’s tempting to simply do that via that e-mail, and allow the payments to go through to the wrong place.

“You need to have constant validation of the beneficiary accounts and account numbers and account ownerships,” said Narayan. “It’s absolutely paramount from a corporate treasury perspective.”

The layered approach means that entities can no longer fight fraud with spreadsheets. Automating solutions and bringing new API-based or portal based services can make sure technology does the work for you, allowing you to focus on building your business. The right experienced partner can help you find the latest mix of tools to fight APP fraud.

“We can no longer just rely on one approach,” said Pitt. “We can no longer be reactive. We can’t just monitor transactions. We can’t just look at historical behavior. We can’t just look at some intelligence. We have to have this layered approach in cybersecurity. We want to put as many barriers before that fraudster as we can.”

The post Fighting Authorized Push Payment Fraud on All Fronts appeared first on PaymentsJournal.

As more financial institutions adopt chatbots to converse with their customers, the numbers reveal not just cost savings but increased efficiency. Galileo Financial Technologies, the technology platform behind SoFi, has seen significant improvements—such as response times improving by 65% and a 50% reduction in chat drop-offs—when customers interact with an intelligent digital assistant.

These developments make a compelling case for any bank looking to improve both customer relations and the bottom line. In a PaymentsJournal webinar, Dave Feuer, Chief Product Officer at Galileo, Diane Tucker, Senior Vice President for Global Operations at SoFi, and Christopher Miller, Lead Analyst of Emerging Payments at Javelin Strategy & Research, discussed how AI chatbots are transforming businesses.

Capturing Micro Moments

The first step in designing how conversational AI should interact with a customer is analyzing their intent. Why is the customer seeking assistance? Insights can be drawn from their recent activity, current events, and the products or services they use. Understanding—or even predicting—the reason behind the interaction enables a tailored experience that shows the bank’s focus on the individual.

It’s not just about cost savings; it’s about fostering deep engagement. Opportunities to capture significant moments for a customer are known as micro moments. Customers often reach out to their bank when something has gone wrong. It’s up to the bank to build on that engagement, earn trust, and turn that micro moment into a spotlight moment—one where the customer feels their needs were met quickly, efficiently, and in a personalized, customer-centric way.

“Micro moments are about being where a customer needs you to be, and staying out of the way when they don’t,” said Feuer. “You want to make banking seem easy, personal, and connected but not feel like it’s imposing. Don’t send push notifications five times a day to annoy a customer. Don’t make it take 10 minutes to identify who you are and why you’re reaching out. Banks should know their customer is, and so should your intelligent digital assistant. It’s up to the AI agent to humanize the experience, to provide the confidence that their problem is going to be solved.”

When more help is needed, the handoff between the chatbot and the agent has to be seamless. If the agent has full context, customers don’t have to repeat themselves.

“That’s something we all hate doing when it comes to customer service,” said Tucker. “I just told you my problem, I gave you all the context, and now I have to start all over. As part of our vision, it’s almost like a transfer from person to person, versus the archaic chat tool that requires a repeat for the human agent.”

Miller added that generative AI and consumer-facing AI agents are sometimes portrayed as capable of solving every problem.

“What I’m hearing here is a narrow case of a specific agent that is designed to solve the particular problems of a member of a particular financial institution,” said Miller. “We have to remember that there’s a specific person with specific needs, and that’s the value of AI.”

Seeking Self-Serve

Gauging the customer’s emotional state is a key part of that. If someone is a victim of fraud or there’s money missing from their account, that call needs to reach a human. Galileo leverages sentiment analysis to detect customer emotions in real time.

People want their problems solved fast. Speed is the number one driver of customer satisfaction. Second is efficacy—resolving the issue on first contact.

Complicating matters is that there is now an entire generation that does not want to speak to humans. This emerging group grew up with purely digital experiences across every aspect of their lives and expects that to extend to their banking relationship. At Galileo, 50% of customers are disappointed if they can’t self-serve. The digital assistant provides the ability to deliver on that promise.

“Many of our members prefer not to talk to someone, and they’re disappointed when they have to talk to human,” said Tucker. “They don’t mind it, but they would rather self-serve.

“One of my favorite use cases is applying for a loan. Debt and income can be very confusing and frustrating and can lead to an emotional moment,” she said. “We provide the bot as a help tool to guide them through the decision making without having to pick up a phone or without having to talk to human. At the end of the day, satisfaction is being delivered through conversational AI.”

Personalization often comes down to understanding the customer’s personality in order to customize the experience. One person might welcome being presented with new options, while another just wants to check their balance and would find it intrusive if a bot interrupted them.

The character of the institution also matters. A traditional bank may want to keep things coldly professional, whereas a fintech might aim for a tone that’s young and hip. It’s not just about understanding the customer’s emotion—it’s also about projecting the institution’s brand personality.

“It goes back to knowing our members and what channels they prefer to communicate with,” said Tucker. “If they’re relying on conversational AI to get their money, so that they can spend less, why not make the AI agent their financial assistant? We have to make sure as we evolve, we meet consumers where they are. If companies claim to be member centric, there isn’t a one-size-fits-all. It’s a one-to-one strategy.”

It’s Not a Crock Pot

Banks can now analyze the frequency and depth of AI interactions, as well as the rate at which conversations escalate to human agents. This helps gauge how much customers trust the intelligent digital assistant. The ideal outcome is a win-win: improved response times and fewer dropped conversations.

“For us it’s about making sure that we’re there for customers wherever they are in their journey, and figuring out the key micro moments in which to surface the intelligent digital assistant,” said Feuer. “So the question is, how can we be there? Is it speaking experiences, is it an in-vehicle experience, or is it micro experiences like on a watch? What are the surface areas in which a customer expects their bank to be there for them, connecting into the fabric of experiences and really providing the same context across all channels? How to attack those surface areas is where we’re spending most of our time.”

According to Tucker, some people make that mistake of thinking you can simply bolt it on and it will work. “It is definitely not a crock pot,” Tucker said. “You can’t just set it and forget it. You have to ensure that to you understand what you’re trying to solve for. We do a lot of research into understanding what our members are contacting us about and understanding what problems we want the chatbot to solve.”

Miller noted that the conversational AI servicing approach isn’t really about AI at all. “It is about an approach to determining needs for customers and then applying whatever technologies are appropriate,” Miller said. “A lot of folks are being told by their boss that they need to have an AI strategy. You don’t need an AI strategy; you need a business strategy.”

The post How Conversational AI Can Drive Banking Relationships appeared first on PaymentsJournal.

Wirecard was once the darling of the German stock market and a leading global payments player—until it went bankrupt due to mismanagement and fraud. The collapse left many major organizations unable to accept payments, having become too reliant on Wirecard as their sole payment service provider (PSP).

While this may be an extreme case, overreliance on a single PSP remains a costly—and all too common—mistake.

As IXOPAY’s Jobe Harrison, Solutions Architect, and Adam Vissing, VP of Global Enterprise Sales at IXOPAY, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed in a recent PaymentsJournal webinar, it is just one of many missteps payments teams make that can leave revenue on the table.

The Build-or-Buy Conundrum

Most payment errors stem from a single theme—organizations often take a set-it-and-forget-it approach to payments. This could mean they simply want to select a PSP and move on, or even believe they can build their own payments infrastructure from scratch.

“Most companies are not payment companies, but everyone needs to take payments,” Vissing said. “What we often see is that merchants that have large technical teams set out on payments implementation projects, thinking that they have all of the engineering know-how in-house and all of the payments know-how in-house to build a platform that scales with their business across all of the markets that they operate in.”

While many teams may be able to cobble together a solution that is sufficient for the company’s current situation, they often come to realize they aren’t equipped to handle all aspects of the payments process.

As the business environment shifts or the company scales, the organization will likely face a hard decision: whether to keep pouring money into the in-house solution or scrap it entirely.

Oftentimes, the sunk costs from these projects would have been better invested in leveraging an existing platform. This makes the build-or-buy conundrum one of the most significant decisions a business faces.

“It’s not super challenging to get payments right, but the challenge is how do you deal with changes?” Apgar said. “Business changes open up new sales channels, geographies, and product mixes that change the risk profile. Then you have regulatory and compliance changes like PCI 4.0 that are coming out this year. At some point, after you’ve gone through a couple of iterations, most merchants sit down and say, ‘How do I make it easier to manage change?’”

A Silent Anchor

Merchants seeking help with payments often turn to a PSP. Although a payment service provider can take many burdens off a merchant’s hands, overreliance on a single PSP comes with its own set of challenges.

“It doesn’t show up as a fire on day one but over time, it becomes like a silent anchor for your business, holding you down,” Harrison said. “One of the first big signs is when your payments team starts saying things like: ‘We’d love to test another PSP, but there’s always a but.’ Or they say: ‘It’s too complex, it would require too much engineering effort.’ Or worse: ‘We can’t because all our data is siloed in our current PSP’s token vault.’”

Another red flag is when a merchant’s decline rates spike and they have no visibility into where the issue lies—or any recourse to make adjustments. At this point, the problem goes beyond technical issues and becomes a strategic constraint.

For example, a business may identify an opportunity to expand into Brazil. However, if their PSP doesn’t support Pix—the most popular payments platform in the country—the company will likely face bottlenecks, plummeting authorization rates, and be forced to implement workarounds.

Another issue with relying on a single PSP is that it puts the merchant at the provider’s mercy. The PSP could conceal their prices or restrict services, leaving the business without a benchmark for comparison.

Perhaps even worse, the organization is exposed to serious risk if the PSP stops processing payments altogether.

“In a situation where you cannot take payments anymore, in the majority of cases, these are resolved relatively fast and the impact may be limited,” Vissing said. “Or it could also be a disaster, conversely, if it happens on the wrong day of the year. If your PSP decides to sever their relationship to you, you suddenly find yourself in an absolute emergency situation.”

“Sometimes you get termination notices from PSPs on very short notice,” he said. “We have seen this happening time and time again across many different industries. Not only those that are commonly treated as high risk, but also more traditional ones across financial services and across travel have had these experiences.”

Data-Driven and Dynamic

The potential for a PSP outage is one of the main reasons many organizations have adopted payments orchestration platforms. However, a common mistake is not leveraging these platforms to their full potential.

Smart routing has become a cornerstone of orchestration platforms enabling businesses to optimize payment selection. For example, cascading—a strategy where failed payments are retried through alternate channels—can drive significant additional revenue.

Maximizing authorization rates is another way to boost top-line growth. A smart routing platform can use historical data to identify the processors most likely to authorize a transaction.

Cost optimization is also a key objective of smart routing, though it has become more complex due to emerging payment types and regional nuances.

“There are stark differences when you’re working with debit cards in Europe or in the U.S.,” Vissing said. “In environments where interchange is regulated, routing has perhaps less of an impact on the bottom line, as in other markets such as the U.S., where the routing of a debit card transaction can have a massive impact on the cost that you have for a payment.”

Another key element of smart routing platforms is they give merchants a fallback if their preferred processor is unavailable or a transaction fails.

“For me, smart really means that it’s data-driven and dynamic,” Harrison said. “It’s not just about randomly splitting traffic across PSPs, it’s about those intelligent decisions based on what’s happening in your payment flows. Routing should take those performance metrics like authorization rates and rates by issuers, region, and card type, into account.”

“For example, if PSP A performs better with cards from a certain bank, while PSP B handles cross-border transactions more reliably, a truly smart routing strategy takes all of this data into account,” he said. “Your routing solution shouldn’t be hard-set rules, it should be dynamically altered based on that data that you’ve iterated on and learned from, just like you would with any other product.”

An Innovation Springboard

Many organizations also take a narrow view of tokenization, treating the technology as a checkbox to maintain PCI DSS compliance. In and of itself, PCI compliance is an important process that protects cardholders, lowers the chances of data breaches, and eases the audit burden.

However, fully leveraging tokenization can unlock benefits beyond compliance. For example, issuers largely trust the network tokens issued by Visa and Mastercard more than the primary account numbers that are tied to specific merchants.

This is because the credit card companies’ tokens are dynamic. If a card is reissued or its details change, the network token is automatically updated. This means issuers are more likely to approve these transactions, and incremental improvements in authorization rates can compound into significant revenue gains.

For consumers, tokenization powers aspects like one-click checkout, card-on-file, and in-app payments—all of which have become standard expectations. Yet, the technology holds even greater potential.

“It’s much more than just a security checkbox,” Vissing said. “Of course, as a PCI DSS level one compliant provider, tokenization is also a security checkbox for us. But it has really been an innovation springboard, something that has allowed us to build a fantastic platform. With those merchants that choose to build a larger part of their payments infrastructure themselves, that’s typically one of the first things that they have to implement before they can get anywhere.”

Real Business Impacts

Because of the rapid shifts in technology and regulations, one of the most important considerations for merchants is to build flexibility into their systems from the beginning. Although it may be tempting for an organization to choose the PSP that offers the fastest integration or the flashiest products, this often leads to bottlenecks down the line.

“You should instead think about how are you going to stay portable?” Harrison said. “Things like setting up your stack in a way that makes it easy to plug in new PSPs are important nowadays. The moment you have multiple PSPs, multiple routes, the ability to shift traffic, that’s when you gain that negotiating leverage. I’ve seen merchants drop basis points off their processing fees just by introducing a secondary provider, so the business impacts are real.”

In addition to partnering with more PSPs, an organization should leverage smart routing to reduce fees and increase authorization rates. This functionality becomes critical as businesses scale or enter markets dominated by specific payment methods, such as in Southeast Asia.

Another way to ensure flexibility is by creating an agnostic vault. If a company’s tokens are owned and stored by a single PSP, switching providers can be difficult. The organization would either need to recollect card data from all its customers or undergo a lengthy migration process.

“Either way, you’re locked in with your PSP, and that’s more than a technical limitation, that’s a risk,” Harrison said. “Contrast that with agnostic tokenization or even network tokenization, where the tokens are portable and they’re not tied to one processor or PSP. Now, you own that customer relationship.”

“You can route transactions based on performance, and you can failover during an outage,” he said. “You can run A/B tests across PSPs, which allows you to scale globally without re-architecting everything. It puts you back in control.”

Moving to a Growth Lever

To reclaim control, merchants who have previously treated payments as an afterthought must now make them a priority.

“If you still think, ‘I’m going to go with the largest PSP I can find or the first PSP that answers my request, and that will be enough to set me up for success for the next few years,’ I think you’re going to have a bad time,” Vissing said. “The mindset you should be at includes a layer of abstraction—call it an orchestration layer—that is the basic blueprint for payments infrastructure today.”

As more organizations adopt this approach, one of their highest priorities should be payments optionality.

“It’s really about a shift from thinking of payments as plumbing to thinking of it as a product,” Harrison said. “Something you can iterate on, optimize, and even use as a competitive advantage. When teams start to think that way, everything else follows. Better architecture, better data, better customer experience, that’s truly when payments move from a cost center to a growth lever.”

The post The Greatest Payments Mistakes, and How to Solve Them appeared first on PaymentsJournal.

For too long, payments have been seen as a necessary evil—plagued by compliance headaches and operational friction, with little opportunity for revenue generation. Embedded finance is flipping that notion on its head, transforming payments into a strategic growth lever.  Where payment solutions were once siloed, modern platforms now reconcile across product lines, powering the next generation of embedded finance use cases.

In a PaymentsJournal webinar, John MacIlwaine, CEO of Highnote, and Hugh Thomas, Lead Analyst of Commercial and Enterprise at Javelin Strategy & Research, explored how embedded payments represent a quantum leap for many businesses—and what to consider when choosing the right partner to support this transformation.

The Origins of Embedded Finance

Embedded finance started with large banks issuing credit cards, which required processing the cards and their transactions. As banks began outsourcing this processing to third-party providers, it laid the foundation for what we now call embedded finance. Some of the first embedded finance platforms focused on building a layer in front of these back-end legacy processors. This allowed other businesses to access processing capabilities from these early providers—marking the genesis of embedded finance.

These early systems were essentially wrappers or facades over core processing infrastructure. However, the limitations of those core systems didn’t foster true innovation; they merely enabled more accessible interaction with outdated technology.

“What we’re talking about now is unlocking a capability that goes above and beyond credit card processing—capabilities that previously were not possible,” said MacIlwaine. “It’s about AP invoice automation, embedded finance, and virtual card issuance. To do that, a lot of different platforms and innovations just on the infrastructure side needed to evolve.”

A Platform for Innovation

Legacy platforms revealed the potential of embedded finance but fell short of delivering on its promise. They simply weren’t designed to keep up with front-end innovation—they were designed to process transactions efficiently.

Modern platforms, like Highnote, take a different approach, offering end-to-end innovation through a unified architecture that natively integrates issuing, acquiring, and credit. This resonates with customers eager to move faster, try new things, and differentiate themselves. The ecosystem is moving at such a fast pace, and this wave of innovation is taking hold across multiple verticals.

“We’ve seen many cases where, as they scale, payments businesses run into problems if they don’t have a solid general ledger at the core,” said MacIlwaine. “Highnote wanted to avoid the common problems in reconciliation, settlement, and reporting. At the same time, we allowed them to address more than one payment method, more than one settlement window, more than one capability. All of this was done while still maintaining that transparency for our customers to know, at any point in time: what is the balance of my multiple accounts, what’s been authorized, what’s been settled, where is the money. You need to know where all these dollars are at any one point.”

Flexible Payments for Modern Fleets

Fleet issuing has become a compelling use case for embedded finance. Fleet businesses that issue fuel cards are disrupting legacy infrastructure and increasingly require the features that modern platforms provide. These businesses need access to in-depth Level 2 and Level 3 data, which enables them to offer targeted discounts and incentives across their networks.

“We all probably thought this was a pretty simple transaction—you pull up to the station and fill your tank—but as these fleet businesses emerge and compete, there are advanced capabilities that require more of a platform and product support,” said MacIlwaine. “Having the proper platform in stream during the authorization allows for questions about such things as whether this the right truck driver or the right amount of fuel.”

Fraud controls are also critical in the fleet space. Fuel cards are often used to fill unauthorized vehicles, so putting controls in place has allowed these businesses to operate more efficiently.

Fleet providers may also offer corporate expense cards for employees or disbursement cards for truck drivers. The power of a strong embedded payment platform is the ability to leverage multiple program types in a way that doesn’t require separate onboarding, integrations, or operational processes for reporting.

Enabling Innovation

Embedded payments provide benefits that were traditionally either non-existent or complicated and expensive to implement through a bank. They highlight that an embedded platform is not vertical-specific but a horizontal platform with enabling capabilities. This allows customers, regardless of their industry or competitive focus, to leverage the platform’s capabilities in ways that make the most sense for them.

“Embedding cards that plug into the payable processes, and to the particular cash management processes of a given organization, is huge,” said Thomas. “The notion that you can look at the solution and be able to say, ‘Does this give me $20,000 more working capital a day?’ That’s huge.”

Under the legacy infrastructure, customer had to go back to the provider to request data exposure or tweaks to an API if it wasn’t functioning as needed. Highnote offers a platform that allows for that innovation, enabling customers to drive change and move fast.

While there are platforms capable of issuing and acquiring, the real challenge is doing so in a way that brings tangible benefits to customers. Achieving this requires a unified platform that significantly reduces acquiring fees and enables real-time settlement.

Highnote doesn’t need to wait three days for acquired funds to pass through different payment rails to reach a final settled state. Instead, they journal the funds from the issuing account to the acquiring account and make them immediately available to customers.

Future-Proofing Innovations

Modern platforms are crucial because they focus on the abstraction of creating systems that can evolve, regardless of what the future holds. This concept is often referred to as future-proofing.

“Maybe five years ago we weren’t even thinking about trying to support a stablecoin or digital currency,” said MacIlwaine. “But we didn’t have to pivot or rewrite in order to do that, because our general ledger was developed in a way that it doesn’t matter if it’s stablecoin or fiat. That’s the reason for the abstraction around the general ledger. We can embrace these new capabilities for the future.”

By not relying on third parties to handle these features, Highnote provides its customers with a canvas to innovate, grow, and leverage both current and future technologies. It doesn’t start with the technology or the goal of leveraging digital currencies; instead the key question is: what is the business benefit? With digital currencies, it’s real-time settlement and access to capital that are driving adoption. 

Opening Up the Possibilities

Not all companies will adopt embedded finance, but any company involved in selling products or engaging in commerce is inherently connected to financial transactions. This connection provides an opportunity to embed further into the customer journey and solidify those relationships.

Financial service providers will be keen to integrate into payment processes like these. They can support experimentation in this space through rebates or upfront help. Business should not hesitate to lean heavily on them, embedding these capabilities into RFPs for financial services products, particularly in payments. 

“It’s important to have a partner that  doesn’t dictate that strategy based on their limited capabilities, but rather partners in a way  that opens up possibilities and helps to enable growth,” said MacIlwaine. “Now the tables have turned where the opportunity to generate revenue to provide much better customer engagement and customer value by extending into embedded finance opportunities.”

The post Embedded Finance: Bringing Payments Under a Single Umbrella appeared first on PaymentsJournal.

The headwinds that once held back financial institutions from adopting crypto—whether due to regulatory concerns or a lack of understanding of digital assets—are finally easing. In the coming years, a fifth of all U.S. money center banks and public companies are expected to allocate at least 2% of their treasury holdings to crypto. Digital assets such as Bitcoin, Ethereum, XRP, along with dollar-backed stablecoins, are poised to play a bigger role in the global financial system.

Stablecoin usage for cross-border payments is growing rapidly, and crypto ETFs are seeing significant adoption. Combined with positive regulatory developments and mounting pressure from institutional investors, the digital assets industry is entering a new era of adoption. In a PaymentsJournal webinar, Joanie Xie, Managing Director for North America at Ripple and James Wester, Director of Cryptocurrency at Javelin Strategy & Research, discussed this incredibly exciting time for the sector. 

Tokenizing Assets

More institutional players are recognizing the advantages of digital assets, such as enhanced transparency, efficiency, and lower costs. Major firms like JPMorgan Chase or Goldman Sachs have been exploring the integration of tokenized platforms into their service offerings. 

Tokenization involves converting traditional assets into blockchain-based tokens, making it easier to create, transfer, and settle assets in a decentralized manner. This has the potential to revolutionize the markets for foreign exchange, commodities, bonds, ETFs, mutual funds, and real estate by creating greater efficiency and transparency, while offering increased liquidity.

Over the past two to three years, financial institutions have increasingly embraced the benefits of public blockchains, such as instant settlements, automated compliance, and 24/7 financial operations—all driving greater efficiency and transparency. By working with public blockchains in a compliant manner, financial institutions can deliver better products at a lower cost.

“We’ve seen companies across different industries increasingly adopting digital assets and blockchain technology,” said Xie. “It’s been mainly to enhance operations, engage with new customers and streamline their financial processes along a wide range of financial assets, including stocks, bonds and money market funds.”

One example is BlackRock, which last year launched Biddle, a tokenized money market fund, on public blockchains. Similarly, Fidelity and PayPal have embraced digital assets by offering crypto trading and investment services to their customers. In global cross-border payments, institutions like Travelex Bank are leveraging blockchain technology to expand into new corridors, improve their FX services, and acquire new customers.

The Custody Platform

To enable tokenization, an institution must have very robust digital asset custody capabilities. Without that, it’s difficult to offer tokenized assets to customers.

“Banks need to have a secure custody platform to safeguard digital assets,” said Xie. “When they choose the custody service provider, they have to be very careful to choose the right one.

“We work with DZ Bank, which has leveraged blockchain to tokenize financial assets and unlock new revenue streams for the bank. At the same time, they provide institutional-grade digital asset custody services to their customers. It’s a very critical piece of that entire world.”

Use Cases for Stablecoins

Another rapidly growing payment use case is stablecoins, which serve as a bridge between traditional finance and digital assets. Particularly valuable for cross-border payments, stablecoins can enhance speed, transparency, and efficiency.

“Stablecoins are the number one topic that we have discussions with our clients right now,” said Wester. “That’s not surprising, since we’ve looked at all of these use cases over the last five or six years and we always knew they were possible. We’ll probably see more large players getting to the space and coming out with new products and services very soon.”

The Importance of Regulatory Guidance  
One of the biggest drivers behind institutional adoption is increasing regulatory clarity. The overturning of SAB 121 earlier this year cleared the way for banks to directly invest in and custody crypto assets. Shortly after, OCC issued updated guidance allowing banks to engage in crypto activities, and FDIC followed suit by clarifying that FDIC-supervised institutions can engage in crypto-related activities without requiring prior approval. 

Regulatory developments are evolving rapidly, especially regarding the Know Your Customer and Anti-Money-Laundering rules. Compliance teams must stay up to date with the latest requirements for handling digital assets, including considerations around capital gains and cross-border tax implications. Banks will need to regularly train their compliance teams on new regulatory updates and revise their internal policies to ensure teams can manage digital asset transactions efficiently and compliantly. 

Banks also need to make sure that they have a secure and efficient infrastructure that integrates seamlessly with their existing systems. Key areas to focus on include building a high-performance network and adopting blockchain networks specifically designed for financial use cases, such as the XRP Ledger. 

Partnering with specialized firms can enable banks to access cutting-edge technology much faster, without overextending internal resources. Banks should carefully evaluate partnerships that can support the design and development of flexible, scalable systems—allowing them to expand and diversify their offerings as they grow. 

Getting In on the Future

Traditional finance systems are being disrupted by emerging technologies. Adopting blockchain and digital assets now can help banks gain a competitive edge. Those that resist this shift may struggle to remain relevant as the industry and the underlying technology continue to evolve.

“Step number one is for banks to assess their Treasury strategy and digital asset diversification,” said Xie. “Identify opportunities to diversify into digital assets and explore different use cases in payments in treasury operations or in their investment strategies. For the banks who have already experimented in the past, maybe this is a good time to move forward from proof of concept to conducting pilots.”

Wester also notes that financial institutions and technology vendors need to understand this is a generational shift. “It’s going to take some time, but every financial institution and vendor needs to be paying attention to it. It’s going to cross pretty much every team, too,” Wester said. “It’s not just a technology shift, it’s a product shift, it’s risk and compliance shift.” 

Xie added: “The final takeaway is that this technology is real. Banks that embrace these technologies strategically today will unlock more opportunities, improve their efficiencies and deliver better services to their customers in the future.”

The post Digital Assets Deliver: How FIs Are Leading the Next Financial Era appeared first on PaymentsJournal.

Many banks rely on legacy systems, often built 15 or 20 years ago—sometimes on IBM mainframes. The original developers have likely retired, and there’s minimal documentation on the system’s architecture. These systems are black boxes—any change risks unintended disruptions, making banks hesitant to make any modifications.

As a result, banks are increasingly looking for modern solutions that allow them to innovate without the risks associated with overhauling legacy infrastructure. That’s why Payments-as-a-Service (PaaS) has emerged as a viable option for banks of all sizes.

During a PaymentsJournal webinar, Deepak Gupta, Executive Vice President for Demand Fulfillment at Volante Technologies, Belhassen Belkhechine, Payments Product Manager at Azqore SA, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the benefits of implementing PaaS.

Meeting the Customers’ Needs

No one chooses their bank based on the quality of its payment service. However, if payments are not executed swiftly and efficiently, clients will notice and likely take their business elsewhere. These concerns have given rise to PaaS, though it still faces skepticism from many financial institutions.

“When I joined Volante almost six years ago and started the business plan for Payments-as-a-Service, the belief was that a bank is never going to put their payment solutions online on a cloud,” said Gupta. “They were concerned about security, and about keeping their data outside the data center. Lo and behold, five years after, most of our deals are on Payments-as-a-Service.”

If banks don’t adapt to their customers’ expectations, staying ahead of the game will be difficult. Speed is critical in payments, as is the quality of service. Customers will have little tolerance for downtime.

Overall, banks don’t need to invest time and money in learning different applications, navigating multiple UIs, or creating data lakes to gain a unified view of the customer. Additionally, there are business benefits, such as flexible pricing models.

“We are in Switzerland, with a lot of banks in Europe and in Asia,” said Belkhechine. “We need to manage their local payment as well as the different payments in the SEPA area. The pay-as-you-go model has allowed us to choose the rails that we need, and the features that we need. We can also take advantage of the economy of scale because we share together the evolution of your system.”

The Necessity of the Cloud

A bank can’t effectively execute a PaaS without a cloud-native solution. Mid-sized and small banks should secure their payment systems on a public cloud like Azure or Amazon.

“If you are a Tier 1 global bank, you have the means, the resources, and the knowhow to run it in your private cloud,” said Gupta. “But midsize and small banks have to ask themselves if that is the best usage of their people, even if they have the IT resources. Are you going to spend those scarce, expensive resources on maintenance? You might be better off using them to improve security and scalability.”

With a cloud-native PaaS solution, Volante has seen straight-through processing rates rise from the low single digits to 80%-90%, with more than 90% reducing payment processing costs. It eliminates the need to maintain a large mainframe or a team of 1,000 developers to lower processing expenses.

“Revenue is the endpoint now,” said Wester. “That is very different than the way we used to look at payments, where we’d often ask, ‘What’s even possible?’ Many times, the answer was that we simply didn’t offer those options, so we’re not going to be able to deliver that product. We’ve since realized that customers will leave for products that meet their needs and expectations.”

Scaling Up the Service

When someone describes a solution as scalable, it’s often viewed in the context of a single product line. For instance, an institution might evaluate its system’s ability to handle retail payments on Black Friday and determine if it can manage that load.  

However, scalability extends beyond just a single product line. It also refers to the system’s ability to scale across different lines of business. Can it be adapted to handle other payment rails, diverse settlement mechanisms, or various payment types? How far can these additional platforms be expanded?

“We have a Tier 1 bank that launched two rails, expecting to create more business for the bank,” said Gupta. “Lo and behold, when they launched these offerings, they found out that one is doing well, and the other one isn’t doing that well. Now the plans have changed and they want to add the third rail. You need to be able to evolve at the speed of business. You need to work with a provider who doesn’t lock you in a box when the game changes.”

Any bank looking to leverage PaaS should remember that it’s driving the process. Too often, vendors come in dictating what the institution should do and how to do it. Instead, the bank should focus on addressing its biggest pain point. If, for example, the wire system is struggling to meet growing demand, that should be the vendor’s primary focus.

The Technology Evolves

If a vendor can’t keep up with technological advancements, they risk falling behind in an ever-evolving industry. Banks must avoid relying on systems that will become outdated and legacy-bound in just five years.

For example, it’s clear that artificial intelligence will revolutionize the payments industry. Companies should partner with a provider that’s actively investing in emerging technologies—whether that’s AI, new payment types, or fraud prevention. They should inquire about how the provider plans to leverage AI to enhance STP rates, boost staff productivity, and reduce error rates.

“We have a customer who’s live on real-time payments,” said Gupta. “When they went live, they didn’t think that they’re going to need the Request for Payment feature. Nobody was asking for it, so they planned to worry about it in phase two. They could make that decision because they knew if they needed it, they wouldn’t have to build something new. They wouldn’t have to go through a six-month cycle of testing it. They can just turn on the feature.”

Seeking a Single Hub

Payments don’t operate in isolation; they are part of a complex ecosystem with a range of interconnected solutions. Many banks use multiple fraud detection systems, sanction screening tools, and ledgers. Additionally, banks often have separate applications for different payment types—one for ACH, another for wire transfers, and yet another for SWIFT transactions.

PaaS frees banks from having to worry about these complexities, streamlining their operations.

“When we think about B2B payments today, we think about ACH, SWIFT, FedNow, and RTP,” said Gupta. “Why do we have to think like that? Does FedEx ask you which plane you want the package to go on? Or whether you want it to go through Ohio or Chicago? They ask you two questions: When do you want it and what are you willing to pay for it?”

“Why can’t we do the same thing in payments? Why can’t we have a single payment hub which can provide all the payments type to any bank in the world?” he said.

The post The Easiest Route to Modernizing Payments? PaaS. appeared first on PaymentsJournal.

Financial institutions have been hesitant to embrace the array of payment types now available, from instant payments to stablecoins. However, these technologies offer more than just a faster means to an end—the operational efficiencies they deliver can have a significant impact across an organization.

In a PaymentsJournal webinar, Nick Botha, Global Payments Sales Manager at AutoRek, Michel Vaja, Head of GTM Europe Cards & Payments Practice at Capgemini, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the state of the payments industry, the benefits of emerging payments, and the approaches financial institutions can take to transform their organization.

The Overall Objective

The payments industry has flourished over the last two decades, and 2024 was no exception. According to Capgemini’s World Payments report, 1.6 trillion digital payments were exchanged globally. Digital transactions saw double-digit growth across all regions, with Asia leading the way.

“It’s quite a dynamic and interesting market, both in transaction volumes but also in value,” Vaja said. “What is stimulating the market is instant payments—we’ve seen more than eighty countries across the world adopting instant payment schemes. Of course, that introduces a number of new use cases for corporate consumers. There has also been the rise of open banking, where there has been strong growth over the last 12 to 18 months.”

The overarching goal is to build a global real-time payments economy, and last year saw significant progress toward that objective. Emerging technologies, like cloud platforms, are becoming integral to the infrastructure that supports the vast transaction volumes processed by organizations.

Another key trend is the integration of artificial intelligence and machine learning into the payments space. AI is making an impact in areas ranging from fraud prevention to data management. This new technology is also closely tied to various regulatory initiatives, which has shifted the broader conversation about the industry.

“Payments regulation over the last 10 years or so has been about encouraging competition, encouraging growth, and bringing new entrants to the market,” Botha said. “In today’s world, the regulators are trying to understand what needs to be in place to put control frameworks around certain types of payments, and especially the technologies that are being introduced to payments.”

A Technology Deficit

The technologies driving the acceleration of payments have created more opportunities than ever for financial institutions, but they have also introduced complexity and uncertainty in many cases.

“It’s exciting on one end to know that the world is getting smaller and smaller from a payment standpoint,” Wester said. “But on the other side, what does that mean in terms of where our products are going to go? What can our companies do? What can financial institutions do? That’s a bit more daunting simply because we are opening so many possibilities.”

The rapid pace of technological innovations means that, despite investing in tech solutions for decades, many organizations still find themselves operating at a technological deficit. In Capgemini’s report, European banking payment leaders were interviewed about their readiness to support SEPA Instant, an EU instant payment rail. The study found that only 7% of these leaders felt their organizations were prepared to comply with the regulations.

“They looked at readiness just from a compliance standpoint, while many in the industry are massively investing in those initiatives to generate more value,” Vaja said. “If (the institutions) are not ready to comply, it tells a lot in terms of how much they are ready to leverage some of those initiatives to enhance their payments customer propositions. A lot of work still needs to happen there.”

A Tough Sell

Shifting to a new payments paradigm can be a tough task because traditional banking systems are reliable and well-established in many countries.

“It’s an expensive, time-consuming exercise to keep up with the times,” Botha said. “For many, it’s this thought process of, if it’s worked until now so it should continue to work. When we speak to businesses that have been around for a long time, they’re very heavy on the head counts that are required to run these processes. It’s hugely expensive, and the reason is they’re running off these legacy tech stacks.”

While the current model may be effective, it will become increasingly difficult for institutions to shift to new payments protocols, such as ISO 20022. The standard offers significant benefits, like richer transaction data, but adoption is not as simple as flipping a switch. Many of the current systems aren’t equipped to handle the extensive data that the format provides.

When it comes to instant payments adoption, the reliability of the U.S. traditional financial system has been a significant barrier. The financial services space has traditionally been risk-averse, which means that tried-and-true payment systems are often valued over innovative systems that could invite risk.

“Financial institutions want to run a cost-benefit analysis and some of the stuff that we talk about in terms of benefit versus cost is a little iffy,” Wester said. “Sometimes we have to estimate and say, ‘We know this is going to be good for you.’ The idea of these financial institutions implementing some of the technological advancements, even though we know they are going to come with benefits from efficiency, it becomes a very tough sell.”

Walking the Transformation Path

The efficiency benefits from payments modernization can unlock significant revenue. However, even as organizations begin to recognize these benefits, they may still be unsure how to proceed. Transformation is often viewed as an expensive, multi-year program fraught with risk.

“The risk aversity of organizations can be a barrier to walking the transformation path,” Vaja said. “Where we’ve seen organizations be successful is when they accept that they need to be in an ongoing incremental transformation state. A key consideration for your bank is to define your organization’s transformation trajectory and your quick wins. Having a clear road map is a key aspect with which we’ve seen many organizations be successful.”

As many companies undertake modernization projects, they tend to focus heavily on the front office, particularly in improving customer acquisition or user interfaces. While these aspects are important, the most dramatic impacts are often achieved by transforming middle- and back-office systems and processes.

“Organizations operate on thin margins, and it becomes a diseconomy of scale if you’re not utilizing automation and the newest technologies to help your business increase margins and generate more revenue,” Botha said. “It’s fundamental to understand what your teams are doing to make sure that your payments are settling, you’re driving up liquidity, and you’re reducing settlement times to generate more revenue.”

Technology Interplay

The payments industry is soaring, driven by a growing number of enablers, including open banking initiatives, instant payments rails, digital currencies, and new payment formats. However, for organizations, navigating this complexity can be challenging, as they must balance innovation with the need to combat fraud and maintain compliance.  

“I would strongly encourage bank executives to look at those initiatives and regulations as opportunities,” Vaja said. “More importantly, I would encourage executives to look at how to combine some of those capabilities together to generate value, because combining richer data, real-time money movement, and the payment services offered by non-banks presents a major opportunity.”

As financial institutions undergo payments transformations, they should focus on understanding the interplay of technologies within the organization, rather than searching for a magic bullet.

“You can have the greatest system doing reconciliations, the greatest system processing payments, the best ledger technologies, and the best front-facing applications, but if they are not effectively communicating with each other in real time to allow for the effectiveness of the payment product that you’re offering, it becomes null and void,” Botha said.

To achieve this interoperability, many organizations will have to lean on partners—especially those providers who can lighten the lift on some of the middle- and back-office processes that often seem like a chore.

“Someone told me at a conference that reconciliations were not a very sexy part of the process and I disagreed with him,” Botha said. “What we do is play a part in that process of unlocking the potential for increasing your margins and generating further revenue. AutoRek is helping some of the biggest organizations around the globe with their data difficulties, and showing them how to reconcile effectively.”

The post Payments Modernization: Always Evolving with Tech appeared first on PaymentsJournal.

The introduction of the Federal Reserve’s FedNow in June 2023 presented many financial institutions with a dilemma: should they adopt the new system, or stick with The Clearing House’s RTP, which has been in use since 2017? As many banks are discovering, the best answer might be to embrace both.

In a PaymentsJournal webinar, Anoop Basavarajaiah, Head of Payments at Volante Technologies, Matthew Brazda, Head of Real-Time Payments Product at BNY, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, discussed the future of both instant payment systems, the emergence of critical use cases, the role of ISO 20022, and the challenges of fighting fraud in real time.  

 The Current State of Instant Payments

Since many U.S. banks already have a relationship with the Federal Reserve, the FedNow network has been able to scale slightly faster than RTP. FedNow currently has more banks live on its network, though this still represents less than half the account reach in the United States. Overall, 70% of accounts can currently receive a payment on RTP, compared to about 30% on FedNow.

The Fed aims to bring that 70% closer to 100% as quickly as possible, with a particular focus on onboarding the long tail of smaller community banks and credit unions.

“I like to say FedNow was the tide that lifted all boats for faster or instant payments,” said Tavilla. “It’s pretty impressive how FedNow went from 35 participants that launched to over 1,100 FIs.”

Since 2017, fintechs have been pushing banks to enable instant payments in 15 seconds. They’re challenging banks: if you can’t offer this, let us know where we can go.

“Everybody wants to reach each other through instant payments and provide that interoperability,” said Basavarajaiah. “There could be somebody on RTP and someone  else on FedNow. How do you make sure that if I can’t send through FedNow, I can send it through RTP. And If I can’t send it through RTP, can I send it through FedNow?

“In the next two to three years, it could be exactly like the European market, where most banks are already on instant payments. The same thing is going to happen here.”

Critical Use Cases

Most real-time payment use cases are business-to-business (B2B) or business-to-consumer (B2C). The new transaction limit for RTP of $10 million (FedNow’s is $500,000) will enable many new B2B or corporate use cases in areas like real estate, merchant settlement, invoices, and payroll. It will provide flexibility for payments that might have previously depended on conventional business hours.

There are also some emerging peer-to-peer use cases, such as when someone wants to send money to their nanny. But the greatest growth may be in B2C, which could allow individuals to receive a loan or an insurance claim in 20 seconds.

“If a customer is booking travel, the bank may offer them 2% cashback to pay through instant payment,” said Basavarajaiah. “Banks want to make sure that it’s all instant so it’s risk-free, and they don’t have to go through the traditional wire or ACH.”

Another promising use case is Request for Pay, which has been a feature of RTP since its inception. Any business purchasing commodities from a seller can make the payment without having to use checks or wires. In these cases, the goods would be delivered before the money arrives, leaving the seller at risk.

“We will hopefully see a lot of bank adoption on Request for Payment received next year, particularly from retail banks,” said Brazda. “We’ll also hopefully see enablement of additional use cases for using Request for Payment.”

Recently, Walmart announced plans to enable pay-by-bank using real-time payments for online transactions. However, e-commerce and recurring payments have yet to be approved by the network. Once approved, these will open the door to increased volume and monetization opportunities for banks and fintechs, benefitting their end customers.

The Role of ISO 20022

The ISO 20022 messaging standard is starting to make a significant impact on U.S. payment systems and instant payment. RTP was the first truly domestic payment network toadopt the messaging standard, and FedNow launched with ISO 20022, migrating their specifications for Fedwire from the legacy forum to ISO 20022.

The types of messages used to send and request payments are very similar. One key similarity is that when banks join either network, they are required to receive a real-time payment message. Many banks are looking to combine access to both networks into one solution to offer to their customers.

“I like to think of ISO 20022 as the lingua franca between the different payment systems,” said Tavilla. “When the FedNow payment rail was being developed, even though the ISO 20022 messages weren’t identical between FedNow and RTP, the Fed team worked closely with The Clearing House to ensure that the messages were close, to ensure compatibility even though the systems aren’t interoperable today.”

Faster Payments + Fraud Prevention

Along withfaster payments, there’s also been an acceleration in faster fraud. Most banks expect the sending bank to handle sanctions and fraud, so the receiving bank doesn’t have to worry about them. However, everything must happen in real-time.

The primary responsibility lies with the institutions that originate these payments. The receiving bank has only five seconds to respond to the payment and post the funds, which isn’t enough time to conduct a comprehensive risk management check.

As a result, the Know Your Customer (KYC) and due diligence aspects of the onboarding process become absolutely critical businesses.

“I’ve had the privilege of working with multiple institutions who prioritized the KYC and due diligence aspects of bringing these clients on, because real-time payments are instantly revocable,” said Brazda. “If you haven’t vetted your customer before that, that’s the risk you run. Those are the things can impact other customers, other financial institutions, and even other non-financial institutions.”

Both RTP and FedNow have what’s called account activity thresholds, which are daily limits that banks can configure by account for sending payments. Any bank participating in FedNow can also add specific combinations of account routing numbers, and the FedNow system will automatically reject payments originated with those accounts.

24/7 Availability & Flexibility with Payment-as-a-Service

With payment-as-a-service, consumers gain the flexibility of a payment system that’s available around the clock. The payment network, regardless of its architecture or software, is offered as a 24/7 service, ensuring constant connectivity to FedNow and RTP.

With PaaS, that’s one less thing the bank needs to worry about. All they have to do is get registered with FedNow and RTP.

“There’s no preference at the end-customer level to choose between the networks,” said Brazda. “They don’t really even see that you’re sending a real-time payment. All they want is for their money to get from point A to point B fast. That’s the main objective for both networks.”

The post RTP or FedNow Instant Payments? The Answer Is Both  appeared first on PaymentsJournal.

A significant portion of the U.S. population is active in the digital world but remains invisible to financial institutions. These consumers are actively seeking a bank or financial firm that can help them access an economy that, for the most part, is out of their reach.

In a recent PaymentsJournal webinar, Joshua Linn, Senior Vice President of Product Management at Socure, and Christopher Miller, Emerging Payments Analyst at Javelin Strategy & Research, examined how vulnerable populations are affected by the lack of a financial footprint and what organizations are doing to reach these consumers.

Digitization Challenges

Gen Z and new-to-country consumers are growing segments of the U.S. population, but when they apply for an auto loan, government benefits, or an apartment, they are often denied. As Socure found in its recent report, America’s Digital Ghosts, these consumers are tech savvy and plugged into the digital world, but unable to use the financial system to build their economic lives.

“Digital ghosts aren’t some spooky internet phenomenon, they are real people,” Linn said. “It could be your younger cousin who just started college or a neighbor who recently moved in from another country. The U.S. financial system relies on credit histories and traditional documentation, which leaves many immigrants, minorities, and young adults out.”

Though the U.S. has an advanced and well-established financial system, roughly half of Gen Z consumers and many millennials are locked out of the economy. Digital ghosts are comfortable with apps and online banking, but the systems aren’t set up to recognize them.

“It’s a phenomenon that in many ways is the inverse of what we have seen with other digitization challenges,” Miller said. “It is an onboarding challenge for folks who are already participating in digital systems, but the systems haven’t caught up to that reality.”

Many of the regulations governing banks were established in the wake of the financial crisis and were designed to protect banks and consumers from over-leveraging. While the intentions were good, these regulations have made it more difficult for consumers under 21 to qualify for credit cards.

The affected portion of the population isn’t a small group—approximately a third of Gen Z say their biggest hurdle is accessing services that require a digital financial footprint.

“It means Gen Z has gotten a late start on building their credit histories, which are the benchmarks used to identify them in the financial services space,” Linn said. “It goes further than credit cards—Gen Z is less likely to own homes or cars and less likely to have driver’s licenses than previous generations. The criteria that financial companies use to verify their clients aren’t as relevant to Gen Z.”

Immigrant Sentiment

Roughly a third of the U.S. immigrant population is in a similar situation, which has caused an overwhelming sense of frustration and disillusionment.

“Imagine coming to the U.S. full of hope and ambition and finding out your financial history doesn’t count here, and you have to hit the reset button on your economic life,” Linn said. “Nearly half of the immigrants surveyed said getting financial services approved in the U.S. is more complex than back home. For some immigrants, it takes over two years to rebuild their financial footprint.”

Many immigrants were denied access to jobs because of identity verification issues, and a disturbing number of immigrants believe they will never be able to build the financial footprint to be on equal footing with U.S. citizens.

Despite these obstacles, most immigrants still have a strong desire to participate in the U.S. financial system. Because credit and other financial vehicles aren’t available to digital ghosts, they are using every means to participate in the U.S. economy.

“From a payments perspective, one of the intriguing things is the persistence of cash and the continued interest in cash on-roads, like cash reloading of prepaid cards as a payment mechanism,” Miller said. “These are ways for consumers who can’t get into the system to participate in a digitized economy. The persistence of cash counters the narrative that we’re moving inevitably towards a completely digitized economy.”

Rethinking Sources

The continued use of cash among younger populations goes against the long-time belief that older consumers would be most resistant to digital payment methods. However, any reliance on cash among Gen Z users is not by choice—they will likely abandon cash once they gain full access to the digitized economy     .

To create a financial system that can support them, institutions will have to rethink their data sources. That means considering rental payments, utility bills, or student records instead of the sole reliance on credit histories.

For Gen Z consumers, which often lack traditional identifiers, there’s an opportunity for tighter collaboration between educational systems and financial services providers.

“There is an intersection between underage verification and parental consent and digital identity which can be hard to navigate,” Linn said. “Just under half of the Gen Z demographic do not have bank accounts, so they’re starting from a tricky place. When you add in the parental consent angle, you’re trying to connect two potentially ghostly digital identities. It’s like trying to tie two invisible strings together.”

However, school systems have already verified information for both students and parents, which could present a path forward. The biggest hurdle is to create a system that is secure enough that parents and students can tokenize their identities and relationship to form a multi-factor authentication method that translates to the digital world.

Another potential verification process for digital ghosts could come through social media platforms. Many social media companies now require identification of both parents and minors, so a social media account could also be used as a digital token to verify a user’s identity for financial institutions.

For immigrants, institutions should find ways to translate financial histories from the consumers’ home countries. There are also immigrant resources that are currently used for employment verification that could be used for financial services evaluation.

“A potential solution for any digital ghost is a risk-based approach,” Linn said. “Instead of an all or nothing process, an organization could create tiered access to the consumer, given they can verify some basic information. They can establish a relationship with the consumer and then ramp up the services that are available to them over time, based on their behavior on the platform.”

Impossible to Ignore

There is a perfect storm of factors that makes digital ghosts impossible to ignore any longer. The U.S. population is at a significant demographic tipping point—in six years, the number of deaths will outnumber births for the first time.

The country’s economic growth will be reliant on the immigration population just as Gen Z becomes the largest workforce demographic, making it critical for institutions to build inroads with the most important segments of the population.

“Creating financial inclusion is important enough on its own,” Linn said. “But the U.S. economy can benefit from the talent and potential that this segment of the population can bring to the table. It’s not just about helping digital ghosts; it’s about helping the U.S. level up as a society.”

The post How Financial Institutions Can Unlock Growth     appeared first on PaymentsJournal.

Data is the foundation of business-to-business expense management and corporate credit. Effective data management gives CFOs and finance offices insight into high-margin revenue opportunities and highlights the path to overall business efficiency.

In a recent PaymentsJournal webinar, Aaron Bright, Head of B2B at Galileo, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed how harnessing the power of data can drive the CFO’s office forward. 

The Importance of Automation

Integrating data flows is the first step toward automating the expense management process, a task that is often resource-intensive for finance teams.

“Automating data integration into ERP or expense platforms reduces manual work like the bulk uploads and reconciliations that occur in traditional expense management,” Bright said. “Utilizing a platform that is directly connected to network transactional data can significantly boost an expense management system and make it more accurate.”

Many businesses struggle with data silos caused by fragmented systems, which can lead to inconsistencies and poor data quality. Consolidating these systems into a single platform helps resolve these issues challenges through data aggregation.

The automated aggregation of transactional data is crucial because it provides financial professionals with a broader perspective on their business. This information can help reduce costs, uncover efficiencies, and offer insights into how the finance office can access new funds and improve cash flows.

Additionally, it can also help the CFO’s office identify and eliminate risks related to fraudulent or inaccurate transactions. For example, identifying duplicate expenses across multiple vendors can help a company maximize its bottom line.

However, there are still a significant number of businesses who aren’t there yet.

“I’ve given talks about the importance of automation in treasury departments, and I often ask the financial professionals in the audience how much of their business is automated,” Bodine said. “It’s almost inconceivable to me how many businesses only have certain functions that are automated, and how many have no automation at all.”

The Innovation Curve

Companies at the forefront of innovation are increasingly looking for ways to embed financial products directly into their platforms.

“Large brands like Shopify or Starbucks are using open banking tools to incorporate things like loans or savings for their customers,” Bright said. “From a data perspective, embedded finance offers another way to get important information about consumer payment behaviors, which can be used to build better financial solutions.”

A substantial data repository can be analyzed to enhance decisioning-making, from selecting the most suitable payment methods to managing working capital loans. However, to tackle a finance office’s most complex challenges, more advanced tools will be necessary.

“Across the board, CFOs from small businesses to Fortune 500 companies say the most difficult challenge they face is cash flow forecasting,” Bodine said. “Without proper analytics and automation, forecasting cash flow and liquidity is next to impossible. The technology might not be there quite yet, but with AI and sophisticated data models, we’re reaching the point where we can more accurately forecast those aspects.”

The User Experience

Reliable data is also the basis for personalizing user experiences, which is critical for the adoption and implementation of financial management tools across an organization. For both consumers and businesses, the modern-day user experience must be mobile-first.

“The consumerization of business banking has been a hot topic,” Bright said. “Business owners are familiar with the features that are available in consumer online banking, and they want the same functionality. They want early access to funds, relevant notifications, and the ability to upload receipts or deposit checks by mobile check capture. Of course, they want to send and receive payments like they can on consumer digital-first banking platforms.”

Business banking is more complex than its consumer counterpart, and that complexity grows as companies scale. When it comes to data collection and analysis, many larger brands don’t want to reinvent the wheel—they want to partner with companies that can provide the data they need in an automated fashion.

“The larger brands prefer to work with partners and technology platforms that have likely onboarded many of the same clients before,” Bright said. “Those partners are likely to have baseline information on their client businesses, like the type of business, the owner, and even the tax ID number. Obtaining access to that data makes the onboarding process much smoother for business customers and enhances the user experience.”

Common Points of Compromise

As onboarding becomes more automated, there must still be a thorough review to ensure the business is legitimate and compliant. A solid foundation is essential for effective KYC and KYB checks.

Given the massive volume of data companies handle, they need a platform that can aggregate data and analyze it for signs of fraud.

“Companies like Galileo offer platforms that can remove personal identifiers from data and analyze larger-scale data trends,” Bright said. “Once our platform identifies the common points of compromise in a company’s systems, the organization can then reduce those types of transactions to mitigate fraud and disputes.”

Capturing payments and receivables data in real-time is critical to combat fraud, especially with the rise of instant payments. In addition, a sophisticated fraud detection system is necessary as criminals employ more advanced tactics.

“To catch today’s criminals, a company must have a partner or someone in the organization who can think like a criminal,” Bodine said. “In Las Vegas, the best way to catch a card counter is to hire a card counter. Coupling fraud expertise with tech like AI is going to be best solution companies can implement to identify and mitigate fraud.”

An Ecosystem of Partnerships

Artificial intelligence excels at fraud detection, but its impact extends to nearly every aspect of the finance office.

“The advent of AI will bring much more effective cost control measures to expense management,” Bright said. “It will be exciting to see how it can take historical transactional data, provide insights, and help businesses automate responses. AI can potentially reduce costs, improve efficiencies, and offer cash flow management solutions.”

As technology becomes more complex, it becomes harder for companies to go at it alone. Businesses often face the choice of buying or building financial solutions. Most will rely on a network of partnerships to handle aspects like fraud controls, customer disputes, and front-end user interface design.

The right data management partners do more than just build a data repository—they also interpret the data and deliver insights that are customized to a business’s needs.

“It all starts with good data,” Bodine said. “Organizations that don’t have the ability or the resources to mine and nurture good data will have to lean on technology and partners, because they can’t do it all themselves. They will have to think long and hard about their partnering strategy.”

The post How Data Powers B2B Expense Management appeared first on PaymentsJournal.

The correspondent banking system that has been the framework for cross-border payments for decades has become inadequate to meet the demand for global remittances. However, with so many technology solutions available, many financial institutions might be unsure how they can participate in the growing cross-border payments segment.

In a recent PaymentsJournal webinar, Gary Palmer, CEO and Founder at Payall Payment Systems, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the obstacles facing global payments systems, the potential solutions, and the emerging paradigm for cross-border payments.

Purpose Built

One of the main reasons why there have been issues when sending cross-border payments is that there was never the purpose-built infrastructure to support it, whether that be through a core bank system, a digital banking platform, or a back-end system.

Sending a payment across borders requires processes that can account for aspects like risk, compliance, process automation, data sharing, and payment orchestration. So far, there has not been a widescale solution that allows the entire ecosystem to enjoy transparent, efficient, and safe cross-border payments.

One reason this infrastructure hasn’t existed is because financial institutions simply haven’t had the time or the budget to build it.

“I had lunch recently with the CTO of a major U.S. financial institution, and we were chatting about his massive technology budget for innovation,” Palmer said. “We found out that it wasn’t so massive, because 90% of his budget is spent doing three things. One, protecting the institution’s data and their systems from hackers. Two, trying to keep thousands of disparate applications and systems current, and three, trying to keep products up to snuff with regulatory changes.”

By the time a financial institution fulfills these essential obligations, there is little left over for innovation. As a result, originating institutions who want to offer customers cross-border payments, or correspondent banks that are under pressure to improve how they support payments from foreign financial institutions to the U.S., might be unsure how to proceed.

The Human Angle

Though it is challenging to facilitate cross-border payments, the demand is stronger than ever. That creates an opportunity for financial institutions to provide a solution that can touch almost every person on the planet.

“When you think about how global our world is, it means you can own a retail shop in Dubuque, Iowa, and you’re importing goods from India or China,” Palmer said. “You might have a software designer in Eastern Europe and a leather supplier in Argentina. Small retailers are now engaged in global trade and selling products worldwide on Etsy and Amazon. They need to be paid.”

In less-developed areas of the world, a marketplace seller on eBay or Etsy is not just concerned with the speed of getting paid and the costs associated with the transaction. These payments are extremely significant to these individuals because they could be the difference in obtaining medical care for their family or putting food on the table.

“There’s a human angle here,” Palmer said. “There are businesses that have struggled or failed because they were waiting to get paid from a cross-border transaction. A better cross-border system helps financial institutions to not only help their local community, but there is also a trickle effect to other parts of the world. It starts with giving customers the ability to pay suppliers and vendors efficiently.”

Speed and Safety

Though cross-border solutions can make an enormous impact, they can also be difficult to safeguard. As payments systems have gotten faster, and in many cases real-time, there has been some concern that this speed could be exploited by criminals.

“Some have said that real-time payments systems undermine an institution’s ability to protect the safety and soundness of its payment systems, to prevent money laundering, and to make sure that nefarious activities aren’t happening,” Palmer said. “I’m passionate about this and I can prove it, that speed and safety are not mutually exclusive with the right software solution.”

If cross-border payments become slower and more regulations are tacked on, they won’t be a functional solution. Consumers could turn to alternative channels that would be unregulated and unsafe. Instead, cross-border payments should be front-and-center in financial institutions that use software to facilitate them.

A Modern Alternative

Most of the new cross-border payment technology solutions are geared toward disintermediating financial institutions. However, there are solutions that are designed to work with banks.

Both Visa and Mastercard have created frameworks for cross-border payments that financial institutions can utilize. For example, Mastercard Move is a product that is a modern alternative to the classic correspondent bank structure.

Mastercard Move gives banks the ability to make transfers in more than 100 countries, and in most of those countries the transfers are in near real-time. In addition to faster settlement, when a bank is connected to the framework through a platform like Payall, they will receive confirmation of delivery for both sender and recipient. There also aren’t the typical fees associated with foreign transfers.

That functionality can have a dramatic effect on smaller businesses.

“I like to speak in terms of cash flow and liquidity, but I don’t say that in terms of only Fortune 500 organizations,” Bodine said. “Cash flow and liquidity are very important to the unbanked and the underbanked, and to small business owners. With the proper tools, the inefficiency that has plagued cross-border payments can be mitigated, and cash flow and liquidity for those individuals can be improved.”

The Next Few Years

Because financial institutions are still in the earliest stages of adopting cross-border payments technology, one of two things will happen. Either classic correspondent banking systems will adopt software that allows them to be competitive, or alternative paradigms will begin to gain traction.

“My prediction is that we’ll see more financial institutions all around the world offering these types of products to their customers,” Palmer said. “In five years, we’ll see more pay by bank payments using infrastructure like ours. But I want to be clear, we’re literally just getting started. There’s a long way to go before that happens.”

There may also be new constructs like domestic networks that connect to other domestic networks. In a few years, banks will have more options than ever for how they can enable funds to move around the world. Regardless of the framework, there is a clear need for change.

“I can’t overemphasize the importance of efficiency, speed, cost, and transparency,” Bodine said. “I had the great displeasure of paying for a wedding overseas, and I spent large amounts of money in the correspondent banking system just to get the funds there, and then I had to wait long periods for confirmation. The whole time I’m wondering whether my money was actually safe.”

The post How Financial Institutions Can Change the Paradigm for Cross-Border Payments appeared first on PaymentsJournal.

Fraud always seeks the path of least resistance. In the world of payments, hackers look for vulnerable spots to exploit. The rise of artificial intelligence introduces yet another layer that criminals can manipulate and enhance their methods.

In a recent PaymentsJournal webinar, Juan Funes, Director of Fraud and Decisioning Products at Mastercard, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed best practices organizations can use to maintain effective fraud mitigation strategies and stay ahead of evolving threats.

 The Multiplying Avenues of Fraud

With the proliferation of digital payment methods, both opportunities for convenience and avenues for fraud have exploded.

Taking into consideration the diverse ways you could use a single card in a day:

“Living in New York City, I can use the stored card in my digital wallet to tap and get on the subway; I can order lunch using a delivery app with my card on file; later in the day, I might use the same card to buy sneakers from a new online merchant by manually entering the card details. In the evening, I might go to a restaurant for dinner and pay using my physical card,” said Funes.

Such varied transaction scenarios create multiple points of vulnerability:

“I’m one of those people who loves payments, so I have wacky things like a payment ring that I wear when I’m going for a run so I can buy water because I don’t want to carry a wallet,” said Wester. “I have all of these things that I pay attention to. Most people don’t, and yet they still use all of these new modes of payment. It’s just unconscious, so most people don’t even think about the fact that they use information that’s stored in their phone.”

The Interconnected Digital World: A Playground for Criminals

As our world becomes more digital and interconnected, the threats multiply. Organizations must brace for attacks from diverse and distributed criminal networks.

Advanced technologies enable fraudsters to refine their strategies continuously. “At Anti-Fraud conferences, I’ve seen examples of fraudsters promoting their services via social media, bragging about the success of their exploits via encrypted messaging apps. It’s the commercialization of fraud.”Funes mentioned.

AI isn’t just for automating legitimate tasks; it is also accelerating the evolution of fraud. It enables criminals to streamline costly manual processes and rapidly process data for maximum advantage.

“The fraudsters are very smart. They go through the same processes that we do when evaluating a business case. They’re asking, ‘What are my costs? What are my benefits?’” Funes and Wester explained.

The Imperative of Communication and Shared Vigilance

Effective fraud prevention doesn’t exist in a vacuum; it necessitates robust industry-wide communication and vigilance:

“My team is constantly communicating across functions to understand what’s trending in their space,” Funes stated. “It’s not just about looking at metrics but understanding the intelligence behind them. We see trends shifting from location to location, region to region.”

This collective understanding allows organizations to tailor their defenses more precisely. If a particular fraud pattern is successfully thwarted in one region, the insights gained can be leveraged globally.

Putting the User First

Fraud prevention is fundamentally about balancing risk control with consumer convenience. Persistently advancing technology presents a dual-edged sword: while it offers robust new defenses, over-reliance can inadvertently create user friction.

Therefore, it’s crucial to strike the right balance. “If fraud prevention protocols significantly impact cardholders, they may switch to other products. Finding the right balance is essential for each organization and the industry as a whole,” emphasized Funes.

Looking Ahead

Given the global scale and complex fraud patterns that are difficult to detect in isolation, organizations must stay agile and informed as we forge ahead in this rapidly changing landscape. A comprehensive set of rules, combined with the latest technologies and industry collaboration, will be essential in combatting fraud on a global scale.

Mastercard, a leader in the industry, has been at the forefront of innovation, leveraging AI for over two decades. As the landscape continues to grow and evolve, the company remains committed to safeguarding the entire digital ecosystem through its AI-fraud solutions.

“With global perspectives and the ability to adapt learnings from one region to another, we can mitigate these threats more effectively. Efficiency, balance, and robust rule sets are the future of fraud prevention,” Funes concluded.

The post Keeping Up with Fraud Attacks in the Age of AI appeared first on PaymentsJournal.

Truly effective spend management goes beyond just controlling costs—it’s about enhancing efficiency and unlocking value. The advent of artificial intelligence is introducing new ways for payment processors to increase that value.

John MacIlwaine and Alexander Hagerup are on complementary sides of this discussion. MacIlwaine, Co-founder and CEO of Highnote, helps companies move beyond legacy payment providers, while Hagerup, CEO and Founder of Vic.ai, leverages machine learning to power more efficient, automated payments flow. In a recent PaymentsJournal webinar with Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, they discussed how advanced spend management tools, integrated with modern embedded finance features, are transforming back-office processes.

The AI Enhancements

AI offers the opportunity to take a comprehensive look at corporate spending across both vendors and customers. Real potential becomes visible through AI, which serves as roadmap for moving customers away from checks or other outdated processes.

According to Hagerup, there are two primary ways AI is enhancing the payments process. The first is through insights and analytics. Since AI is processes data in real time, it enables instant reporting across accounts payable and expenses, while its predictive capabilities help organizations forecast future spending in both areas.

The second enhancement is in processing efficiencies. AI improves error reduction and fraud prevention while also delivering cost savings by reducing the need for manual transaction processing.

This increased data visibility offers deeper insights into various fraud patterns, not only for individual programs but across the entire platform. It can help detect transactions that deviate slightly from normal spending patterns, allowing them to be flagged as suspicious.

“I like to view AI as a coworker,” said Bodine. “I’m a farmer, and when the tractor was developed, it didn’t replace the farmer. It made the farmer more productive. Where the farmer used to be able to plow and harvest 5 to 10 acres, they now could plow and harvest maybe 100 to 200 acres. I view AI the same way.”

The combination of a strong payments platform and a forward-looking AI operation propels payments into a much brighter future.

“These types of symbiotic relationships really are pushing the overall experience and the outcomes for our customers to be developed much, much faster,” said Hagerup.

The Benefits of Payments Orchestration

The benefits arise not only from what the data reveals but also from the events occurring throughout the entire payments lifecycle. One of the capabilities of a high-quality payments platform is event notification.

“Traditional platforms and solutions historically in our view have been a bit of an encumbrance,” MacIlwaine said. “It’s our job to enable AI and to do what they need to be competitive with regard to both the data, but also orchestration. As checks are cleared, all those events are able to be sent to Vic.ai in terms of how they want to consume them to make business decisions.”

In many payment processes, the different windows and timings can’t adhere to specific rules, making it hard to develop solutions. However, combining event notifications with data allows for innovative solutions to emerge and facilitates the management of these different workflows.

Payments orchestration refers to the strategic coexistence of payment types, allowing an organization to handle different payment methods from various customers or vendors while maximizing the value of downstream data and analytics.

Much of the challenge lies in customizing solutions to meet the varying needs of different vendors or customers. The goal is to allow each company, with its unique processes, to innovate within the payments platform.

“Vendors have different preferences, and they can even have different preferences depending on what they’re getting paid for,” said Hagerup. “Catering to the vendor’s preferences is really important. They need to get paid in the most important payment rail so the money gets to their vendor in time and at a low cost.”

Breaking New Ground

Maybe the biggest advantages for payments processors come from addressing edge cases—businesses that are breaking new ground and leading the way toward new developments.

“The innovators building on top of this platform are what we’re most excited about,” said MacIlwaine. “That’s what is allowing our platform to evolve into the best platform to support accounts payable automation and build on the processes that Vic.ai is highlighting.”

Many organizations remain in a state of transition, relying on legacy systems to manage their payments while eagerly anticipating the benefits that new technology can offer. It’s essential to have a platform that can support older payment modalities while continuing to demonstrate and provide the value of newer models.

“The whole modernization of the back-office is happening at a very rapid pace,” said Hagerup. “The technology is there. Now we just need the world to adopt and build into it.”

The post Unlocking the Benefits of AI in Spend Management appeared first on PaymentsJournal.

It can be difficult to choose the perfect gift! This is just one reason why consumers are planning to purchase gift cards this year. Many believe that gift cards give recipients the freedom to choose what they really want—whether it’s a night out, a luxury item, or a grocery trip.

In a recent PaymentsJournal webinar, Sarah Kositzke, Director of Research and Jay Jaffin, Chief Marketing Officer at Blackhawk Network (BHN), along with Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed gift card purchasing and redemption trends, sustainability, year-round gifting and gift cards as incentives.

Economic Impacts and Key Trends

There are mixed messages in the macroeconomic environment. It appears that inflation is slowing, but prices are still 25% to 30% higher than just a few years ago. Consumer confidence is trending up, however, and retail sales are expected to rise by 3% year-over-year.

On the topic of omni-commerce, Kositzke noted that it has been redefined, and “it no longer means just a physical store and a website. It is evolving to include an entire ecosystem where consumers interact with brands from apps and social media to the influencers to the in-store experience.”

Continuing to trend this year is the shift to mobile payments. Around half of U.S. adults use mobile payments, which has, in turn, driven demand for digital gift cards. Buy-now-pay-later (BNPL), is also projected to grow by 50% next year. These emerging payment methods make it critical for merchants to offer multiple payment options at the point of sale.

Sustainability is also playing a larger role in purchasing decisions, with roughly two-thirds of consumers willing to pay a bit more for sustainable products.

“There is an opportunity here for the gift card industry,” Jaffin said. “They may seem like little pieces of plastic, but creating the raw materials for plastic gift cards takes about four times as much carbon as it does for durable paper stock gift cards. The reality is, it’s good for the planet, but it’s also good for business. Consumers want options like paper gift cards instead of plastic because they’re recyclable.”

Consumer Purchasing Habits

Not only do consumers spend the amount they receive on a gift card, but nearly six in 10 spend more than the value of the card.

“It’s really helping to increase the overall shopping basket, and also extending the brand beyond the traditional gift card value,” Kositzke said. “You get the chance to build a loyal customer, which often happens when they receive that initial gift card. About a quarter of people got a gift card to a new brand last holiday, which is a great opportunity for them to try something they never had on their radar.”

Thinking about where people are buying gift cards, consumers generally go to merchants they trust, both in-store or online. In-store gift card purchasing is often driven by convenience; the customer either happened to drive by or already had the stop scheduled along the way.

“In-store still dominates, but about half of consumers are buying cards online and it’s rising,” Kositzke said. “The key is putting your gift cards where people want to shop. A lot of folks use smartphones to make purchases and gift cards fall into that category, so optimizing that mobile strategy is important, especially as we see the demand for digital gift cards growing.”

Most digital gift cards are delivered by email, but SMS and messenger app delivery are increasing in popularity. That has been driven by preferences among younger consumers who expect a digital-first experience. For that reason, drop-to-wallet functionality will be critical going forward as more users adopt digital wallets.

Digital gift card growth will also accelerate due to the convenience factor. In many cases, a digital card might be the only option, like when the recipient lives far away or can only accept a digital card. Digital cards also offer more personalization options, where the sender can add a personalized video or picture.

“However, there is still room for improvement with digital gift cards,” Kositzke said. “There’s a demand for better digital delivery, because emails can be difficult to sift through. If the consumer can get a text message and upload the gift card seamlessly to a digital wallet, there’s a better chance they will use it. Today only about 45% of people are storing gift cards in wallets.”

Fraud Prevention

Financial crimes are an ongoing challenge, so a strong risk management and fraud prevention program is essential for protecting both your business, and your customers.

“Gift card fraud has gotten more attention lately, and, as an industry, it’s our responsibility to take on this challenge and protect our customers,” Jaffin said. “On the merchant end, businesses should report any suspicious activity to law enforcement immediately, because many times fraud is part of a larger operation.”

Another critical aspect of gift card fraud prevention is consumer education, especially around the holidays. Wherever consumers buy gift cards, there should be signage or e-mail communications directing customers to inspect the gift card’s packaging for tampering.

Year-Round Gifting

Birthdays are the number one occasion where gift cards are given, followed by the year-end holidays. However, gift cards are increasingly being given in all types of situations. In the workplace, for instance, they can be a powerful way to incentivize workers.

“It’s a great mechanism to motivate your teams,” Jaffin said. “For example, there is a platform that allows managers to deliver a gift card directly through Microsoft Teams in a team meeting. Not only do you get to recognize an employee, but the entire team gets to see it and it becomes an event.”

Many consumers are also using gift cards for personal spending. Prepaid and gift cards can be useful alternatives to high-interest credit cards in a tough economy. Many consumers report using prepaid cards to control their spending, and 19% said they use gift cards to manage their budget.

In the case of a customer dispute, merchants can offer a gift card as an appeasement, both resolving the issue and retaining the customer’s loyalty. Additionally, gift cards serve as a great reward for customers who have remained loyal to a brand.

“It’s really for any moment when you want to say thank you, whether it’s to the teachers, delivery drivers, or bus drivers,” Kositzke said. “It’s effective and it’s sought-after all year, so companies should have likewise have a gift card plan that stretches the entire year. From small moments to big moments, gift cards are given year-round.”

To learn more about U.S. shoppers’ attitudes toward gift cards, download BHN’s recent e-book, 2024 Could be a Shockingly New, Shockingly Normal Year for Gift Cards.

To learn more about what industry participants can do to mitigate gift card fraud, download BHN’s recent e-book, The Broad Report 2024, the State of Gift Card Fraud.

The post Exploring the Current Gift Cards Landscape appeared first on PaymentsJournal.

Businesses looking to stay competitive, drive growth, and build resiliency are increasingly focused on cash flow. What was once considered a back-office function is now viewed as an opportunity to enhance efficiency and generate revenue.

In a recent PaymentsJournal webinar, Bottomline’s Leo Gil, VP Product Management, and Paul McMeekin, Vice President, Marketing, in addition to Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed key strategies for optimizing cash flow and highlighted how these efforts can elevate businesses.

One: Put Idle Cash to Work

It’s common for companies to have cash on hand, whether from available credit facilities or recent customer payments still sitting in a bank account. Optimizing this starts with cash visibility—having a real-time view of all accounts and balances across multiple banks.

For a company with 20 banking relationships, this means logging into 20 different banking portals, exporting data, inputting it into a spreadsheet, and using macros just to get a single cash position. This process can take hours, meaning the data is outdated by the time it’s ready.

Some boards are still advising CFOs to diversify and work with more banks, resulting in even more portals to manage. This makes forecasting difficult, even for a simple question like how much cash will be available at the end of the week or month.

“One of our clients is a hotel company, which needs to deploy cash sometimes quickly to particular properties to handle extra business or fix issues that might have occurred,” said Gil. “With this finance team, we got elevated to a strategic role in the company where they’re helping the company make decisions. How do we deploy cash? Do we transfer money between accounts? Do we pull from a line of credit we have? How do we do that in a way that maximizes returns and reduces interest expense?”

These functions are only possible if a company has full control over its cash visibility, supported by sound practices and forecasts. The key strategy is leveraging the cash on hand to drive the business forward.

“A CFO told me that his CEO walked in his office and said we have a great opportunity to make an acquisition, but it’s going to cost us X millions of dollars,” said Gil. “Can we do it? The answer is, well, I need to look into it, but you could miss a pretty big business opportunity if you have to wait to make the decision. Companies have to plan and look at everything they have so they don’t miss this kind of opportunity.”

Two: Close Financial Periods Faster

Operationally, you can’t put idle cash to work without properly closing financial periods. Most finance teams experience a rush at the end of the month or quarter to reconcile bank accounts and payments. This is where automation and connected finance become critical.

“Another of our customers is construction company,” said Gil. “They have more than 1,000 bank accounts across 80 banks, and there’s a constant inflow and outflow of payments for critical projects that they are completing. Payments are coming in from clients, while they’re making payments to subcontractors or employees.”

“Now imagine reviewing over 1,000 bank accounts, looking across hundreds of thousands of transactions to match and reconcile between your bank statements and your ERPs and other systems you may have internally,” he said. “Those are the challenges that finance teams face on a regular basis.”

When finance teams are overwhelmed by manual processes, it’s hard to support the business effectively. Strategically, automating the financial period closing process can lead to significant improvements and drive organizational growth.

“Always be closing,” said Bodine. “I think we are getting to the point in the finance world where we’re going to see a more agile approach to closing periods. I don’t think that’s going to happen on an end of year basis, but during the year the ability to have systems in place to always be closing is becoming critical.”

Three: Digitally Transform Payments

Checks are the single most targeted form of commercial payment, yet 33% of payments worldwide are still made by check. Digitizing payments, contrary to what some may believe, reduces the risk of fraud.

“I met with a big university back in February and they were facing 10 check fraud incidents a month,” said McMeekin. “In December they had more in the previous six months than the previous three years combined.”

Breaking it down, let’s first understand how contemporary check fraud works. An organization mails a check to pay a supplier and waits several business days for it to arrive and be cashed. However, criminals intercept the check, often stealing it from the mailbox using a key purchased on eBay. The criminals then visit state business registration websites to create fictitious business names.

This process is often instantaneous, taking advantage of the delay in detecting the crime. This gives the criminals time to act. Digital payments, on the other hand, are not only more secure from the outset, but also make any fraudulent activity much easier to detect quickly.

“In my experience, there is no single better way to quickly improve cash flow than to get rid of paper checks,” Bodine said.

When digitizing payments and paying suppliers electronically, processes become more efficient. Organizations can time their payments strategically, controlling when cash leaves the company, and may also access rebates available with certain electronic payment methods.

Virtual cards are a secure payment type used for paying suppliers the exact amount of the invoice or invoices due. They also offer rebates similar to traditional credit cards. The result is a range of benefits, including safe, faster, more trackable payments.

“We get a bunch of suppliers accepting these payments through the payment network,” said McMeekin. “What we see is that they can typically go from spending two hours a day on reconciliation down to something like 20 minutes.”

Four: Do More with Less

To preserve cash, organizations are asking their employees to do more with less. This often leads to frustration, cutbacks, extra hours, employee burnout, and inadequate tools for the job, ultimately impacting quality.

But there’s a way to do more with less—more effectively. Companies should reevaluate their processes with a fresh perspective and approach tasks more intentionally. It’s important to focus on working more efficiently, maximizing the value of current resources, and leveraging the skills within teams to boost productivity.

“I recently talked with a very decentralized, multi-site healthcare system who said our automation gave them 76 hours a week back,” said McMeekin. “They went from extremely overworked to a regular amount of work and spending less time on repetitive mundane tasks to more strategic initiatives like supplier sourcing, which is leading to a better culture.” 

Five: Adopt an Enterprise-Wide Culture of Cash Excellence

The era of bloated, slow-moving organizations is over. Companies need to learn to do more with less and operate with the agility of a Formula One car, or risk being outpaced by competitors.

This requires an enterprise-wide culture of cash excellence, starting with integration and interoperability. Finance teams need to connect seamlessly across the organization, achieving integrated and automated bank connectivity.

“Every member of the team is going to do better work when engaged and feeling valued,” said McMeekin. “Organizations with higher rates of employee engagement have 18% higher productivity compared to companies where employee engagement is low. So you’re not only getting the results of automation, you’re also getting the results from added engagement.”

Gil added: “The excellence of cash is not just about how much you have today, but how much you’re going to need tomorrow. Are you preparing your company for what’s coming next?”

The post Five Ways to Effectively Optimize Cash Flow appeared first on PaymentsJournal.

There used to be a mantra for enterprises: “Always accept how your customer wants to pay.” That was easier when four or five payment mechanisms were available to the customer. Now, with payments taking an almost unimaginable number of forms, enterprises are trying to play catch-up, serving their customers and, possibly, making some revenue from the payments process.

In a recent PaymentsJournal webinar, Trevor Nies, Senior Vice President for Digital at Adyen, spoke with James Wester, Co-Head of Payments at Javelin Strategy & Research, about the range of challenges digital-first enterprises face in digital payments. The good news is that these challenges are surmountable, and with the right partner, payments can even be a profit center.

The 3 Challenges Facing Digital Payments

Nies sees three challenges shaping digital payments. The first is local nuance, where significantly more payment types are accompanied by more regulation. Much of the worldwide regulation started in Europe, and India has played a big role in regulation as well. But U.S. regulation has opened up opportunities for many enterprises.

In July, the Durbin amendment made it clear that e-commerce retailers must allow a second network to be utilized for any debit card. This offers enterprises an alternative rail besides Visa and Mastercard. That alternative rail can provide significant cost savings, and performance can be better as well. Adyen is investing heavily in these rails as an alternative to the card networks.

The second challenge is fragmentation and complexity, which allows enterprises to route the transaction to the rail that has the highest performance and or the lowest cost. Even when enterprises have a limited set of payment types and regulation comes into play, there are options to determine where and how they route transactions that can still provide an amazing customer experience.

“We used to always tell merchants that you don’t want the consumer to revisit their purchase decision at the time of purchase,” Wester said. “You want to make it as seamless as possible to get it to fruition. Butnow within that payment experience, sometimes we do want them to rethink it because if there is an opportunity then for a BNPL sale, lower your cost, maybe attract them to spend a little bit more.”

The third challenge lies in payment processing.  After all of the developments of the past 10 years, observers might expect payments to have reached a point of stasis, with everything sort of the same, reliable and dependable. But the payments landscape remains very fragmented.

“Aside from very big merchants, it’s rare that you run into large payment teams,” Nies said. “Even some billion-dollar businesses don’t have that. And then you ask yourself, where are they sitting? With accounting? Finance? Customer experience? Or do you have that knowledge spread around? That one person that you deal with may know a lot about payments, but they don’t actually control that relationship with a vendor or a partner.”

While you’re making all of those decisions about performance and cost and everything else, you have to make sure that the customers are not the ones making that decision, either. They just want to be sure their transaction went through.

Calibrating the Fight Against Fraud

Unsurprisingly, more fraud happens when the card is not present. When customers go to a retailer or a restaurant, they want to make sure their card isn’t declined to avoid embarrassment. When consumers make an online purchase, nobody knows if a prepaid card didn’t work.

It can become a vicious cycle: When enterprises start experiencing a damaging amount of fraud, issuers become more sensitive to the fraud and start rejecting more transactions. Then the enterprises start getting false positives, and good transactions are blocked on top of the fraud.

Combatting fraud can be a strategic situation. An organization can get its authorization number high by blocking a good portion of the traffic, which leads to thinking the problem is solved. The issuer feels great because it’s not seeing any dirty traffic come through. But this also creates a lot of false positives on the fraud side of the house and can end up blocking a lot of legitimate customers.

The flip side is that the fraud team can let more suspect transactions through and say, “OK, the fraud is a little bit high, but we have zero false positives.” But the issuer then sees an impermissible amount of fraud, which it starts blocking, which means it starts cracking down on its fraud system rules and models as well.

“The real way to look at this is end to end,” Nies said. “Make sure that you are tracking this funnel from the beginning to the end, see where the drop-offs are, but measuring that because any one of these can negatively or positively impact the others if you’re only focusing entirely on them.”

Attracting Foreign Payments

Enterprises also have to keep their eye on their options when it comes to foreign payments.  Brazil’s Pix is the fastest-growing payment method the industry has seen, even faster than UPI in India.

New payment methods can show up and take a market by storm, and enterprises need to be prepared to adapt and adopt. If a business doesn’t offer that method, its customers are probably going to go elsewhere. It’s important for businesses to have the right local payment methods.

There’s a time element, too. Businesses have to be able to anticipate new payment mechanisms. If something like Pix takes an area by storm, it needs to be integrated quickly. A good partner has its ear to the ground in those areas, paying attention to the stories, the products, the banks, the central banks, and everything else that’s going on in that geography.

Payment as a Revenue Driver

Not long ago, when a vendor delivered a payment system, the enterprise simply wanted that product to work as advertised. It expected to pay a certain percentage for the transaction, and that was it. But now a vendor can come in, learn the business, and come up with some ideas that can increase that enterprise’s revenue.

“It used to be that if you had a brick-and-mortar store, you put a little terminal on your counter and that was the end of it,” Wester said. “Now there are so many different levers that you can pull. A partner can come to you and say, ‘Hey, we know your business, here are some things that you can do to save on costs. Here are some places that you might be able to get additional revenue out of payments.’”

A good payments partner has all the relevant data. It knows what day of the week is the best day to charge—in the United States, make sure you charge a debit card on a Friday, or on the 1st and 15^th, when people typically get paid. If you have fraud or compliance problems, there are a lot of risk providers that can help you with that, too.

These services are no longer available only to billion-dollar companies with a technically savvy team of people. They are available to midsized and even small businesses.

“As a very large PSP, we can see data across the ecosystem and provide insight into what’s happening,” Nies said. “Maybe we see that everybody in your industry is offering Cash App, for example, and are seeing tremendous growth because of it.

“It’s important to consider future proofing in terms of payment mechanisms. A lot of conversations right now have to do with things like artificial intelligence and machine learning. How are you going to capture that data in a way that can be used for future applications with payments?  We’re not even to the point where we understand where we need to go. We are only just now beginning to understand how big this is going to be.”

The post Turning Payments into a Revenue Driver appeared first on PaymentsJournal.

As companies work tirelessly to serve their customers, criminals work to exploit vulnerabilities in the digital product lifecycle. That threat necessitates friction points so companies can ensure that their services are delivered safely and securely. Too much friction, however, drives away customers.

In a recent PaymentsJournal webinar, Ramesh Menon, Group Head of Product Management, Digital Identity & Fraud at LSEG Risk Intelligence, and Kevin Libby, Analyst, Fraud & Security at Javelin Strategy and Research, discussed the delicate balancing act of optimizing the user experience while introducing friction.

Differentiators in a Digital Paradigm

Menon says that we’ve entered a time when 40% of Americans are using peer-to-peer services at least once a month. “According to Consumer Reports, 53% of Americans use digital wallets more than traditional payments, and almost 80% of Americans use their mobile device to manage their bank account,” he said.

The demand for digital products means an effective online and mobile experience is essential for any product. The utmost priority is to have an optimized onboarding process that allows for quick decisioning.

“I can build the absolute best digital product or solution, but if my onboarding process is so clunky that most users give up, my product never reaches its potential,” Menon said.

Many companies try to replicate a non-digital experience, such as a visit to a brick-and-mortar retailer, in the digital world. While that’s nearly impossible to pull off, the digital experience offers a unique set of opportunities.

“In essence,” Libby said, “the proliferation of digital channel transactions has leveled the playing field for institutions and companies. Proximity to one’s home or business, the availability of staffing, the aesthetic of the physical environment in customer-facing spaces, none of these things remain relevant differentiators in a digital paradigm.”

Speed vs. Security

In the digital age, it boils down to balancing security, gained through effective identity verification and authentication protocols, with a nearly frictionless experience that results in fast and easy transactions.

“Expectations about speed in decisioning, funding, and titling have fundamentally changed,” Menon said. “The flip side of the coin is that consumers are also expecting higher levels of safety and security. Though they may not be conducting in-person interactions, they’re expecting that same level of security in remote interactions.”

Generational differences are also forcing paradigm shifts. Millennials outspent Baby Boomers by roughly 10% in 2021, and their digital preferences are far different. It has become incumbent on companies to tailor their experiences. Convenience, speed, and ease are key for younger generations because those consumers are much more acclimated to digital technology. “They want an experience where they know what they want to do, where to go, and how to get it done with no interruptions,” Libby said.

Creating a Forgettable Experience

More organizations are betting on the customer experience, spending millions of dollars to acquire customers. If the customer experience during onboarding isn’t optimal, a lot of that money goes to waste. “Surveys have shown that 73% of consumers say that customer experience is a very important factor in their purchase decision,” Menon said.

If customers’ needs aren’t met, little stops them from going somewhere else. Businesses that create too much friction in the user experience will lose consumers and the efficacy of business over time. Often, those losses are measured in terms of lifetime value.

On the other hand, many companies overreach in their quest to please customers. A company’s mission should be to provide a user experience that is as seamless and easy as possible while maintaining adequate and appropriate friction.

“You want to create forgettable experience,” Libby said. “If your consumer is walking away thinking about all the things that went wrong, you risk them going somewhere else. Whereas if they leave and are not even thinking about what happened, they got what they were after.”

Less Time to React

With speed and convenience come a price. According to Menon, the price is that faster payments mean the criminals reap ill-gotten gains faster, too.

Bad actors can also set up schemes against multiple targets at once, and more money can be misdirected before the crime is discovered. Organizations have less time to react to fraud patterns, making it critical to engage solutions that can identify and stop the emerging types of fraud.

“Criminals only need one vulnerability they can exploit in order to succeed in their mission,” Libby said. “Companies have to protect against all vulnerabilities and all attack factors.”

The Battle Never Stops

Ultimately, the way organizations can balance friction is to take the burden on the back end and save the customer from that aspect of it. “Doing as much transparent data collection and analysis as you can in ways where the consumer doesn’t even have to be involved,” Libby said.

Robust datasets acquired from a variety of sources should be incorporated into machine learning and artificial intelligence, assisting modeling and automated real-time decisioning. Companies should also employ dynamic, multilayered testing of a number of identity parameters.

“It’s really easy for criminals to get around any one or two parameters using artificial intelligence or even traditional fraud models,” Libby said. “It’s harder for them to get around a well-designed system that tests a variety of parameters.”

Libby’s biggest takeaway was to introduce friction only when there’s a need to do so. Companies need to successfully balance a strong user experience with strong identity proofing.

Menon highlighted three takeaways, the first of which is variety. Preventing fraud and staying compliant with regulations mean relying on a variety of techniques to avoid unneeded friction. Companies should also choose solutions that have the breadth to stop not only today’s financial crimes but also tomorrow’s.

Second, organizations need to look beyond traditional techniques like micro deposits or credit header ID verifications. Richer data signals are required to combat fraud, especially the new forms that are driven by AI.

“And number three: The battle never stops,” Menon said.

Faster Payments, Rising Risks

Because of the ongoing battle against fraud, companies like LSEG Risk Intelligence have designed an array of adaptive solutions. The company recently published a white paper titled Faster Payments, Rising Risks to take an in-depth look at friction and fraud.

“It’s about addressing new payment fraud threats and evolving customer expectations in the digital payments era,” Menon said. “And showing customers how our industry-leading risk screening and due diligence solutions protect the customer in conjunction with our digital onboarding suite.”

The post Friction or Fraud: Optimizing the User Experience in the Digital Age appeared first on PaymentsJournal.

Traditional payment gateways have often hindered banks in their efforts to modernize their payment systems. Transitioning to real-time payment capabilities demands dismantling outdated procedures, a task many banks are unprepared to take on.

A recent PaymentsJournal webinar featuring Miriam Sheril, Head of US Product at Form3, Peter Gordon, Founder and Managing Partner at Atlantic Fintech Advisors, and James Wester, Co-Head of Payments at Javelin Strategy & Research, took a closer look at how a platform-based approach is helping banks commercialize their value-added services and develop a more client-centric service model when it comes to payments.

Battling the Legacy

For banks venturing into real-time payments, grappling with legacy back-office technology can be frustrating. Real-time payments hinge on delivering seamless end-user experiences, a demand that traditional technologies have long struggled to meet, especially considering customers’ 24/7 expectations. Implementing FedNow and the RTP network effectively necessitates embracing modern technologies.

“In the U.S., we’re going to see more banks needing to modernize their technology at the back end to make this happen,” Gordon said. “The legacy infrastructure that banks have—batch-oriented, mainframe-based systems—can’t handle the 24/7/365 scaling. It also means that we’re moving from silo-based systems to enterprise-based systems and platforms.”

Managing individual transactions for FedNow and RTP differs significantly from the batch-oriented processing typical of ACH transactions. The infrastructure needs to become modern and cloud-based. Regulatory concerns, such as anti-money-laundering laws, further impel banks toward modernizing their architecture. By providing more seamless solutions through better technology, fintechs like Stripe and PayPal have been pushing banks to turn toward cloud solutions and APIs that allow banks to scale and work more directly with fintechs.

“We focus on trying to insulate banks and financial institutions from having to deal with some of the nitty-gritty annoying stuff, so that they can focus on their customers, their end users, and where they want to make money,” Sheril said. “A truly seamless API will cover all the rails, instead of the bank having to worry about ISO spec version this for RTP, and version that for FedNow, and a third version for Fedwire.“

Wrestling With Complexity

Financial institutions are often stymied by the technological complexity of payments. The systems in place worked well for a long time, but banks are beginning to realize they’re being forced along the path to modernization. And it’s not going to get simpler, primarily because of the silos within their operations.

A large financial institution operates numerous disparate channels, each with its own dedicated system tailored for functions like treasury and wealth management. Yet there’s growing desire within banks for payments to present a unified front, emanating seamlessly from a singular source. This entails breaking down the silos so there’s a consistent experience across the middle and back office, as well as throughout the infrastructure and among technologists.

With this push for new technology, many banks accustomed to constructing their own infrastructure are opting against replacing outdated system internally. Instead, they’re forging partnerships with companies specializing in modern technologies.

“Instead of it being one of the 75,000 things I do, streamline the piece that matters to me,” Sheril said. “Now that we have the ability to have better architecture that’s easier to implement, that is going to be helpful in terms of where banks are going across lines of business and tearing down silos.”

Ultimately, customers simply want convenience. However, there’s growing awareness among customers regarding the various payment methods available to them. They can opt for installments plans, direct transfers, or transactions that accrue points. Financial institutions want to present customers with all of these options.

“That’s where that technology kicks in and says to the financial institution, you have more power now,” Wester said. “Financial institutions have always just looked at a payment as a payment. But now that we’re seeing consumers care, there are ways that you can use that to reinforce the relationship.”

In many instances, customers fully appreciate the advantages of real-time payments only once they’ve had the opportunity to use them. Real estate firms, for instance, are showing interest in real-time payments not because they’re concerned about where their settlements occur but because they want to close deals on Saturdays, a day when most realtors are active.

Consider another scenario where instant payments afford retailers the ability to reconcile transactions at the end of the day and receive funds instantly. For example, on a Friday night, a restaurant reconciling its accounts can simply press a button, and the funds are deposited into its account, enabling them to promptly pay the wait staff.

However, many banks have been unable to facilitate such transactions on Saturdays due to wire closures. As a result, these options emerge as new products and services for consumers and represent novel competitive avenues for financial institutions.

Adventures in the Cloud

Conducting operations in the cloud allows banks to integrate many of their services, yet there has been a reluctance to use such services.

“Ten years ago I was at a conference about the cloud, and the CIO of a relatively large bank said from the stage, ‘We will never put any mission-critical stuff in the cloud. It’s just too risky,’” Wester said. “And the bankers in the audience all nodded sagely. ‘No, that will never happen.’”

Yet more banks are discovering that using a platform-as-a-service provider can reduce costs significantly if it’s done right. They can end up paying a fraction of the cost of building and maintaining a data center.

Another advantage of the cloud is translation. It can take an ACH file and convert it to an ISO 20022 format, maybe even enrich the payment instructions with information, then pass it through a payment system. Those who understand how rich this data is will be the real winners.

Piece by Piece

Implementing new processes in today’s payments landscape means dismantling old ones. It’s important for organizations not to underestimate the challenges associated with decommissioning legacy systems and instead focus on this task with purpose.

Organizations should embark on a journey toward modernization, starting by insulating themselves from risks and addressing their least risky areas first. It’s imperative to start with smaller aspects that can coexist alongside the legacy system. This incremental approach ensures that each step is modernized. Not everything needs to be moved at once.

“This is about getting something better out there and not waiting till your customers leave you for someone else,” Gordon said. “There are ways to do this that help you de-risk the whole migration. Some banks have only taken specific accounts and moved them over. Or only real-time payments. You can start real-time there, then move the other aspects over.”

Said Sheril: “The more complex these requirements get, the more modern the technology has to be. You can’t do it on old platforms. You have to do it on things that are quick. We can only do it because we are on a modern 24/7 platform. Banks need to get this modernization done, but they don’t want it to distract from the focus on what’s important to them, which is their customers and their revenue.”

The post Clearing the Decks for Real-Time Payments appeared first on PaymentsJournal.

As artificial intelligence continues to affect our lives and the business that we transact, its evolution has provided a new opening for those who commit fraud. According to industry estimates, fraud powered by AI is expected to reach $10.5 trillion by 2025. 

As organizations seek new ways to combat this fraud, they must be careful not to alienate their customers in the process. A multi-layered fraud prevention framework bolstered by advanced AI and machine learning-based technology achieves these objectives by proactively mitigating risk while minimizing fraud losses. In a recent PaymentsJournal webinar, Max Spivakovsky, Senior Director of Global Payments Risk Management for Galileo Financial Technologies, spoke with Kevin Libby, Fraud and Security Analyst for Javelin Strategy & Research, about how fraud risks have evolved in an age of AI and what organizations are doing to combat emerging risks

Where AI Is Headed

The evolution of AI and machine learning opened the doors for advanced modeling capabilities, advanced pattern recognition, and behavior analysis. It has generated an adaptive learning of customer activity and behavior. FIs are also increasingly using chatbots with intelligent digital assistants (IDAs) that interact with customers in real-time to address emerging fraud risks. This is another step in the evolution of AI as it relates to fraud.

The natural language processing capabilities that it opened—and the ability to address those models in a faster way—is a huge leap in in the fraud controls available. As for the impact on customers, Spivakovsky said AI-powered fraud mitigation allows financial institutions to enhance their overall fraud and risk analysis approach.  

“Model creation is automated and recursively learned from previous experiences, such that exceptions requiring manual review become less and less common over time,” Spivakovsky said. “That’s a huge win for commercial enterprises and for financial institutions, in that it frees up human capital that would otherwise be tied up with those manual reviews. That, in turn, allows them to utilize their workforce more efficiently and to stretch departmental resources a bit further than they otherwise could.”

Automation has been particularly helpful in helping financial institutions get through the mountain of suspicious-activity reports, for example, that they are required to file every month. AI allows for the creation of more complex models because it is capable of creating rules or models that digest larger number of testable parameters than manually created rules-based systems ever could.

Taking a Proactive Approach

A reactive approach can’t stay ahead of payment fraud trends. To stay relevant in the industry, financial institutions must deploy proactive approaches.

A proactive approach enables the detection of anomalies faster than manual, reactive fraud and risk analysis.

“The link analysis and accuracy of the models make the proactive approach so much more accurate,” Spivakovsky said. “Some of the examples available on the market right now are able to notify the financial institutions or the customers that they might be subject to potential fraudulent activity. For them to save the financial means, we can either replace the card or even restrict some of the customer spend. Being more reactive means we keep our hands on the pulse all the time in terms of model accuracy.”

Proactive fraud prevention systems are set up not only to determine which payment cards are already experiencing fraud but also to determine the potential number of cards at risk to experience fraud because of that compromise. When AI-powered fraud detection tools are used to make those types of predictions, the technology relies on a wealth of data and learns from previous fraud incidents. AI tools can better pinpoint the scope of a potential compromise and proactively identify the accounts most at risk

Breaking Down the Silos

One of the biggest challenges in protecting multi-channel systems is that each channel provides its own set of testable parameters to identify fraudulent activity. Some channels have more robust data to scrutinize than others, and some don’t have access to much data at all when addressed in isolation. It’s critical to break down these silos and consolidate an organization’s efforts.

“In the old way of doing things, you had to create separate models for detecting and preventing fraud in each individual channel without really incorporating information you may have from the last time you interacted with a given user by a different channel,” Libby said. “Things tended to be segmented and isolated. One strength of AI-assisted decisioning is the ability for a program to incorporate data from across those various sources.”

The customer experience with using chatbots, and the ability for the client to complain in real time about a specific incident, allows organizations to convert this input into actionable methodologies within the operational universe or within the first line of defense. This gives the existing models the ability to learn much more quickly.

Today, financial institutions have more customer data than ever, including from incidents being flagged in real-time via customers using chatbots. The implementation of AI and machine learning models allows organizations to gain actionable insights from all this data to create quicker line of defense to proactively stay one step ahead of fast-moving fraudsters.

“I usually talk about it in terms of a digital arms race: the criminals and the cybersecurity and fraud professionals trying to stay one step ahead of each other all the way,” Spivakovsky said. “The difference between what we’ve seen recently and what we’re going to see in the near future is that given natural language models, the pace of trying to outdo one another is only going to increase. We’re going to be playing catch-up for a while, but hopefully in the end we still figure out how to stay that one step ahead.”

In today’s digital landscape, AI and machine learning-based fraud prevention technologies stand as essential allies for banks and fintech companies. By actively identifying and thwarting fraudulent activities, these advanced systems not only save significant costs incurred from fraud losses but also shield the reputation of financial entities from potential harm. And their proactive approach not only bolsters security but also instills confidence among customers, ensuring a resilient and trusted financial ecosystem.

The post Fighting Payments Fraud Without Alienating Your Customers in the Age of AI   appeared first on PaymentsJournal.

A successful payment acceptance policy encompasses flexibility, convenience, and, above all, economic efficiency. However, it can be hard to hit all of these marks in an ever-changing payments landscape.

During a recent PaymentsJournal webinar, Mike Passifione, Vice President of Payments for Billtrust, spoke to Albert Bodine, Director of Commercial Enterprise Payments at Javelin Strategy & Research, about what it takes to build an effective payment acceptance strategy. They discussed automation, dynamic pricing, and why businesses like to pay with credit cards.

Creating a Policy

The first step of any payment acceptance policy is identifying the target audience, timing, and locations for accepting payments. This could be at the point of sale, during cash-on-delivery transactions, e-commerce or in B2C and B2B environments. Ideally, you want to maximize your chances for customer engagement. And having the necessary technology to adhere to a policy becomes extremely important. Having a written policy that lacks full execution is the equivalent of not having a policy.

Despite the desire to satisfy customers, it’s essential to adhere to established protocols. “As an example, a rule of mine is I do not take a credit card payment for a late payment or from a customer over the phone after they’ve been invoiced,” Passifione said. “If I were a sales rep in that scenario, and I’m trying to please my customer, I might make an exception to that rule to get the money in the door and deal with the backlash later.”

Policies must strike a balance between meeting suppliers’ and buyers’ needs. As in any relationship, both parties must benefit. It’s the technology that will enforce this balance, rather than relying solely on your employees. . This approach sets the stage for success for your both your business and for the accounts receivable team.

Digitizing and automating the payments experience offers immense value, allowing you to consider the types of payments you prefer, such as ACH, card, check, or electronic data interchange—and how they are processed. Then, you can evaluate the types of cards and formats you accept, keeping in mind that each buyer may have preferences for interacting with merchants or suppliers.

It’s important to consider the costs associated with accepting each type of card. Can you establish rules that allow you, as a supplier or merchant, to benefit more from these transactions?

“You can say, ‘Yes, I’ll take that card, but I prefer if you pay me within 10 days of my invoice,’” Passifione said. “If not, I’m going to push you towards ACH, because that’s what makes sense for my company.”

Surcharging, too, has grown more popular in recent years in the B2B space. It can be the most punitive way of conducting a transaction because there is an impact on the buyer.

“The surcharge is an interesting development,” Bodine said. “When we originally came to market with virtual cards, the value proposition was, ‘I’m going to pay you in net 10.’ As the supplier, I’m going to be more OK with paying 200 basis points for those funds than they would be if it was net 30. When you go into a buyer-initiated payments scenario, you take that control away from the supplier being able to pull the payment when it’s ready. I have been seeing more surcharging as a direct result of buyer-initiated payment.”

Providing Options

According to Passifione, suppliers and merchants have many ways to control their costs and their acceptance policy without turning to a surcharge program. “A lot of folks are very happy to pay 250 basis points if it means they will get paid within 5 or 10 business days,” he said. “It’s a bit more of an equal playing field. There are things you can do around negotiating terms, as well. A Custom Rate program could get you even more card spend and grow your network.”

Many players in this space are eager to grow card spending, and more collaboration is taking place. “But they need to do it somewhere in between the traditional cost of a very expensive downgraded credit card and the much cheaper ACH,” Passifione said. “A perfect touchless payment that they can apply cleanly, somewhere in between that cost, starts to make a lot of sense for suppliers. I think that’s ultimately where we’re going to see a lot of B2B spend grow in the future.”

Bodine added that with dynamic discounting, it comes down to choice. “I find that suppliers are sometimes willing to pay for different choices,” he said. “The net 5 might be a lot more expensive than the net 15, but they might have the remittance data that goes along with the suit. That’s how you get to a more balanced relationship between suppliers and buyers.”

Differences Across Businesses

Across the buyer spectrum, you may work with enterprise buyers who engage with enterprise customers, often utilizing EDI, ACH, or wire transfers. Midsize customers typically access an online portal for invoice selection and payment processing, while some—particularly those from larger enterprises—opt for virtual credit cards.

Then there are smaller businesses. “In the building material space, as an example, a lot of small to medium-sized construction businesses need the float, and they want to use their credit card to make payments,” Passifione said. “They’re relying on that card issuer and the float and the rewards they get. As you get into the enterprise world, they may prefer to pay with a virtual credit card, but they don’t have to run their business and can quickly pivot to ACH.”

Despite advancements, more than 40% of B2B payments still occur with checks. However, checks pose significant fraud risks due to the exposure of bank account information.

“We should be encouraging buyers to move to an electronic fashion,” Passifione said. “We’re creatures of habit. We’ve been sitting in that 40% range on check usage for what seems like for 20 years. I’m hopeful that changes dramatically over the next 10 years.”

This issue is crucial not only because of fraud concerns but also because of inefficiencies. “Something we talk about constantly is the fact that we can figure out ways to reallocate your employees so that they are doing things that are beneficial for the business,” Passifione said. “They should not be stuck in a room trying to reconcile a $1 million ACH payment that came in the bank because you can’t find any remittance. There are tools to solve for that. These individuals should be doing more thought leadership, higher-impact opportunities, and dealing with higher-impact items that can help you grow the business.”

The post Beyond the Check: Smart Strategies for Managing Payment Acceptance appeared first on PaymentsJournal.

As fraud proliferates across the payments space, financial institutions confront unprecedented challenges. Staying ahead of fraudsters, complying with regulations, and maintaining customers’ satisfaction are paramount concerns. FIs can no longer afford to remain on the sideline and passively observe. Instead, they must adopt a proactive approach to safeguard themselves from external threats in this increasingly complex space.  

In a recent PaymentsJournal webinar, Syed Badar, Senior Director of Product Management at Early Warning®, and Suzanne Sando, Senior Analyst of Fraud & Security at Javelin Strategy & Research, delved into the fraud landscape, the key challenges FIs are facing, and the best practices to detect fraudsters.  

The Fraud Landscape 

The fraud landscape resembles a landmine, with threats lurking in every corner of the payments domain. Fraudsters, leveraging new technologies and advancements, have become increasingly sophisticated. What’s surprising is that, amid the rapid pace of digital innovation, checks continue to be a primary target for fraudsters.  

“Over 60% of organizations are facing fraud activities via checks,” Badar said. “Just last year, 30% of the organizations reported that they face fraud activities via ACH debit and credit¹. 

“And we see new types of emerging, various technologies that, while the improvement in innovation that we see for the consumers, like Same Day ACH, offer speed and convenience to consumers, but they also open the door to new types of fraud. The bad actors are evolving their techniques, and as a result the number of attacks is increasing.”  

Cybercriminals are opportunistic, quick to capitalize on the latest trends in social media platforms and payment methods. Their endgame is to identify the weakest link and exploit it to maximize their profits.  

“We’ve seen this ebb and flow in terms of the efficacy of certain fraud typologies because of this,” Sando said. “One year, account takeover and new-account fraud might be hot. The next thing you know, they’ve shifted their focus to something completely different, like an impostor scammer.”  

Three Key Challenges FIs Face 

Financial institutions are navigating a figurative tightrope, delicately walking a narrow path to advance amid the challenges of managing costs, ensuring customer satisfaction, and maintaining compliance. A single misstep can lead to a potentially catastrophic fall. This presents a challenging balancing act for Fis. Here are the issues they must address to succeed in this highly competitive sector.  

In some cases, FIs are reimbursing consumers for certain payments scams. As FIs cover more scams, operational costs are being driven up. Their reputation may also be at stake if they fail to advocate for their customers. 

The impact on the consumer experience. Another key challenge that FIs contend with is striking a delicate balance between implementing effective controls and other fraud mitigation tools while delivering an exceptional customer experience and minimizing friction.  

Legal and non-compliance issues. Banks and credit unions are required to authenticate all their customers. They must be up to speed with the latest regulations related to know-your-customer and anti-money-laundering protocols.  

The emergence of liability fraud cases, such as those observed in Britain, poses a growing concern for Fis. The rise of authorized push payment fraud highlights the need for similar protective measures for bank customers in other parts of the world.  

“In Britain, they’re shifting liability for certain types of fraud, for authorized push payment fraud,” Sando said. “That shift is going from consumers to the FI. So they’re now going to split the liability between the sending and the receiving FI to cover for the consumer, for the victim—let’s call them what they are, they are the victim. And I think that this is a huge step forward for consumers.”  

Although this would be a win for consumers who have fallen victim to this type of fraud, smaller banks and credit unions could bear a significant financial burden in their efforts to cover costs. Prioritizing fraud prevention and detection becomes imperative to mitigate the impact of these financial challenges.  

Data Sharing to Detect and Block Fraudsters 

The key to fighting fraud lies in harnessing the readily available resource for FIs—their historical data. By utilizing historical data, FIs can evaluate the differences between legitimate and fraudulent transactions, enabling them to better identify patterns indicative of suspicious activity. 

“Everything we’re doing is so digitally centric that you’re relying on all these little pieces of data to create this perfect picture of who it is that you think you’re doing business with,” Sando said. “And the responsible use of that data is critical in preventing payments fraud.” 

When FIs effectively communicate to their customers how data is being used to safeguard them, they establish a foundation of trust. This, in turn, fosters an enriched and more satisfying customer experience, ensuring the protection of the FI and its customers.  

Leveraging Intelligence Insights to Detect High-Risk Transactions 

Early Warning® has developed a suite of predictive intelligence tools that harness a vast amount of historical data. The creation of the National Shared Database^SM resource, fueled by contributions from more than 2,500 financial institutions, forms the bedrock of this repository. Within this framework, Early Warning® has introduced two solutions that help detect high-risk transactions in real time. 

The first solution, Verify Deposit, uses bank deposit data to authenticate the legitimacy of the deposit swiftly, making sure customers get access to their funds while protecting the bank from potential fraud.  

The second solution, Verify Payment, enables banks to detect risky payments in real time, protecting against losses stemming from fraudulent payments. This tool offers insights into account status, account type, and accountholder information. Verify Payment generates a risk score that empowers FIs to make a “risk-based decision” based on this outcome and accept or block the payment.  

FIs are dealing with multifaceted challenges that can be difficult to navigate. Implementing a fraud solution may seem like an additional burden, but it doesn’t have to be. 

“This is where Early Warning® shines, because not only do we just give you access to the tools, but we also have a team of solution managers and account managers who will closely partner with you to identify and understand what your pain point might be,” Badar said. 

“What are your use cases? What is unique about your environment? Your business objectives? Your risk tolerance? We can help you craft a plan to build on top of your stack and integrate solutions that is best optimized for you to minimize the losses, reduce your operational costs while delivering a seamless customer experience that you expect.”   

¹ 2023 AFP^® Payments Fraud and Control Survey, AFP^® 

The post How FIs Can Thrive in the Increasingly Wild West of Fraud  appeared first on PaymentsJournal.

Right under our noses, payment card design has been making strong advances in aesthetic and usage terms. As card issuers fight for top-of-wallet positioning, they have been leveraging design features and formats that enable them to elevate their brand and differentiate their card programs. Features like personalization options and biometric sensors can make a strong impact on the final card design—and enhance customer satisfaction. 

During a PaymentsJournal webinar, Julia Schoonenberg, Executive Vice President for Payment Services at IDEMIA Secure Transactions, and Brian Riley, Director of Credit Advisory Services and Co-Head of Payments at Javelin Strategy & Research, discuss how card design trends are shaping the industry. They talked about not just the look but also the function of the physical card and what issuers have been doing to gain competitive advantages in these areas.

Living in a Visual World

One can argue that design is more important than ever. We live in a world where we communicate virtually and visually, with heavy doses of icons and emojis. Our relationships with banks are no exception.

“Design will increasingly play a key role in the bank card program and strategy,” Schoonenberg said. “There are a myriad of design capabilities impacting the card body material, the shape, the visual effect, texture, weight, and even the form factor.” 

Card issuers that create distinctive and attractive card designs can set themselves apart from their competitors with innovative raw materials, original cutting, and design techniques in line with their market segmentations. Banks can create a payment card that reinforces the bank brand and its positioning and creates an emotional bond with its brand. That can reinforce consumer loyalty by providing cards that strengthen the values users want to convey. IDEMIA Secure Transactions— the leading technology provider that unlocks safer and easier ways to pay and connect —has been at the forefront of that movement.

“The card itself represents the financial institution,” Riley said. “That remains the case whether you’re going into a mature market or developing market, whether the payments go through the internet or offline. That card establishes the front-end focus of the financial institution.”

Express Yourself

Banks increasingly segment their customers by persona to better customize their offerings. Here, too, design can play a critical role. Designs can allow a customer to self-identify as an innovator, as trendy, or at a more premium level. 

Toward that end, there’s been a shift toward empowering users to express their individuality through their payment cards.

“Consumers can select the card product they want also based on characteristics such as a standard plastic card, recycled PVC card or a metal card,” Schoonenberg said. “Banks can also give the opportunity to their consumer to select and even choose the card art of their choice directly from their mobile banking app, allowing them to customize the design of their cards.”

Some banks and card issuers collaborate with artists, designers, or influencers to create exclusive card designs. This not only provides users with distinctive and aesthetically pleasing options but also serves as a marketing strategy to attract customers who appreciate art and design. “When issuers partner with a brand licenses provider, we have seen cards featuring Marvel characters or community images,” Schoonenberg said. “They can be linked with limited edition programs. From what we’ve seen at IDEMIA, they are often very successful.” 

Physical dimensions, shape, and structure are aspects of card design where innovation is flourishing. Even ink has become an area of innovation. Card designs can now incorporate dynamic color schemes, often gradients or iridescent colors that change when viewed from different angles. Some cards were designed with interactive elements such as hidden thermoactive features that appear or change color when exposed to heat. 

The Physical Card

Maybe even more significant than design are the physical features of the card. “The most advanced features that we’re seeing are being developed onto the physical card,” Schoonenberg said. “A biometric sensor allows you to use your fingerprint to authenticate yourself instead of having to remember a PIN. This is particularly convenient for contactless payments.”

These innovations can also mean more inclusivity for people who find it difficult to physically manipulate the card.

Another aspect of card design new to Americans is the dynamic CVV. This feature has been around for a while in Europe, where a dynamic screen on the card keeps changing the CVV. “That is bringing a lot of security to online payments,” Schoonenberg said. “They also have illuminated cards that light up when you when you tap to pay. We’re seeing a lot of interest from financial institutions all over the world for those kinds of features.” 

“These advanced design features have become even more important  as we go towards electronic commerce and increasing payments offline debit card position,” Riley said. “If you’re a neobank, you don’t have branches, per se. The card is the entry point that customers can connect their card to that financial institution. The card itself and the design has its security features, but it also has a statement of the financial institution.”

As the banking experience becomes more remote, Schoonenberg notes that card design plays a vital role. “The look and feel of the card has become if anything more critical,” she said, “as that all-important physical link between the cardholder and the bank.”

The post How Design Is Shaping the Payment Card Industry appeared first on PaymentsJournal.

Artificial intelligence is transforming the way businesses operate, and many are seizing the opportunity to gain a competitive edge through automation.

Although forward-thinking businesses are embracing AI to streamline their operations, others are approaching this emerging technology with caution. And by doing so, they may be overlooking the potential benefits, especially if they continue relying on outdated systems and manual processes.

In a recent PaymentsJournal webinar, Ahsan Shah, Senior Vice President, Data Analytics, at Billtrust, and Christopher Miller, Lead Analyst of Emerging Payments at Javelin Strategy & Research, delved into just how far AI has come over the past few years, particularly in the realm of generative AI and deep learning, and how businesses can successfully leverage AI within their operations.

AI’s Evolution

Shah, in describing AI, likened it to an onion. AI is the outermost layer, the broader ecosystem. Other key components—including machine learning, deep learning, natural language processing, and generative AI—can be found below, under deeper layers. And in the past five to six years, there’s been more of a focus on deep learning and generative AI.

“Everyone’s talking about how generative AI will help, and that is where you essentially have language models, foundational models built by large companies like OpenAI, Google, and Anthropic,” Shah said.

“What this has done, which is a bit different than the other layers of the onion, is give you a language-based interface, a multimodal interface to say I speak the language, and then it can translate that. I can even feed it an image—it can recognize the image and allow you to generate more personalized content. It’s almost like a library of Alexandria. You don’t need to give it your own data, but now you have this interface within the world of AI that gives you another toolkit to do very amazing things.”

AI is just one component when it comes to developing customer and product value from data. Other components include traditional transactional reporting and analytics, all of which create multifaceted layers of value.

Although AI is a powerful technology, it shouldn’t be taken as the be-all, end-all solution. Analytics remain an indispensable component that organizations rely on to make more informed decisions. Thus, OpenAI’s ChatGPT should not be utilized in isolation.

Two key takeaways are emerging, Miller says. The first is the imperative for a shared data ecosystem that facilitates seamless implementation. The second is the potential of generative AI to automate tasks.

“Generative AI creates a move up the value chain in terms of what types of decisions or functions can be automated,” Miller said. “So where report creation might have been a very manual process, we can start to automate the creation.

“The information can be updated in real time as opposed to once a week when someone has to download an Excel file, run a series of macros, and add some data to a slide that gets sent to somebody else and presented in a report.”  

Shah also noted that it’s important to combine generative AI with other tools to deliver the most powerful value. “What you’ve done now is taken generative AI, combined it with one of the other tools, which is analytical, and reduced the time for information, the time to value for what can be done from weeks to potentially seconds or minutes, and that is super powerful,” Shah said

Streamlining Efficiencies

AI will be a game-changer, especially within the accounts receivable realm. When businesses integrate AI within their AR processes, they will be able to automate the creation of invoices, ensuring timely delivery to their customers. Payments can be processed electronically, and automatic reminders can be sent to overdue accounts.

Billtrust’s latest solution, currently in beta, takes the functions and user experiences of ChatGPT and integrates them in the form of a finance co-pilot within its software-as-a-service (SaaS) application.

“What this is doing is giving you the power of language models on your enterprise data in a secure, compliant way,” Shah said. “This is a private beta, and we believe this is the right avenue to build that interface and that connection with our customers because it’s also new for them. We’d love to understand where we can solve the most pain.”

Handling sensitive customer and financial information through AI necessitates robust security measures that ensure the protection of all users. Equally essential is the ongoing measurement of user outcomes with the launching a new solution.

According to Shah, when it comes to generative AI within the B2B space, meticulous planning, infrastructure development, and engineering expertise are prerequisites. This is particularly evident compared with B2C applications, where the enterprise B2B ecosystem introduces heightened complexity and a substantial volume of data. The data’s cleanliness, organization, and formatting become critical elements, enabling AI models to learn and make precise decisions.

Moreover, integrating generative AI models into an organization’s AR platform requires careful planning and a deep understanding of engineering principles to ensure a seamless flow of data and adherence to compliance factors. When a customer is first loaded into the system, it will have its own segmentation, roles, security, and authentication that will not change.

As for measuring outcomes, Shah says it will be in the form of a “bidirectional feedback loop,” which will include customer counsels and working sessions. He hopes that by tapping directly into what customers need, the company will be able to create the most effective road map for its new product.

Implementing AI in Your Business

AI and its various forms are here to stay, but the question that looms among businesses is whether they should adopt it. As previously mentioned, innovative businesses that embrace and adopt AI solutions will flourish in the areas of efficiency, productivity, and customer experience.

Those that are still on the fence run the risk of falling behind and perhaps stifling their opportunities to scale, especially if they still rely on manual processes.

In exploring the adoption of AI, the best approach is to start organically. Start by embedding it within a few small use cases throughout the organization. From there, test and explore.

“Don’t hesitate to learn and adopt where you can identify very tangible business cases,” Shah said. “Don’t say, ‘I’m going to transform all of my accounts receivable or all of my marketing overnight.’ You need to find a low-hanging fruit.

“What I found is most businesses, if they don’t find low-hanging fruit, they don’t get the momentum needed to actually sustain adoption of a technology. AI is no different.”

To learn more about Billtrust’s AI solutions, download our whitepaper, “Leveraging AI to help your AR operations thrive ,” or contact Billtrust  to learn more.

The post How AI Can Revolutionize Business Efficiency appeared first on PaymentsJournal.

With increased mobile phone penetration, a rise in digital banking is a natural progression. Like any other channel, digital banking has evolved over the years, and unlocking its potential is a key to delivering exceptional customer experiences. Tailored innovations—including digital receipts, subscription management tools, and advanced chargeback systems—are reshaping the way businesses connect with their customers. These innovations not only enhance digital interactions but also dramatically reduce fraud, leading to fewer customer service calls and chargebacks.  

In a recent PaymentsJournal webinar, Chris Rimple, Vice President of Product at Mastercard; Alison Betts, Vice President of Global Merchant Processing & Disputes at American Express; and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, delved into the findings from Ethoca’s 2023 Field Guide: What Consumers Want From Digital Banking to determine what consumers seek from their banking experiences. The executives also discussed the state of the digital landscape and offered practical tips that businesses can use to navigate the ever-evolving space.

The Shift to Digital Banking

Consumers expect an omnichannel experience when it comes to banking.  Whether they choose to engage with their bank online, inside the branch, or on their mobile device, an omnichannel experience offers customers a seamless experience as they easily switch between channels.

“We really like to see technology moving in this direction where we have consistency across devices,” Betts said. “That’s a really important customer experience, not just for card members but also for merchants.

“Digital channels are helping us capture relevant details that we can share with our customers, and that’s where digital receipts have become so critical for us. They give card members line of sight into what they bought, whether on their mobile app or they’re logged in on their laptop. They can actually click on a digital receipt, identify what it was they purchased, and it helps to deflect some of their confusion on their transactions.” 

The Growing Preference for Digital Receipts

Ethoca found that consumers tend to gravitate toward four specific features within their digital banking apps, including digital receipts, subscription management, offers and coupons, and the ability to request a refund.

Digital receipts, in particular, continue to influence consumers’ overall banking and retail experiences. Roughly 88% of respondents said they prefer a digital receipt, and 68% said they were willing to give out their phone number or email address in exchange for a digital receipt. Moreover, 50% of consumers who received a digital receipt said they prefer it over a paper receipt. Younger cohorts were far more likely to prefer digital receipts.

“Digital receipts really address the fact that people have a lot of purchases and frequently for small amounts,” Betts said. “I think about my own credit card statement. It’s a heck of a lot longer than my parents’ credit card statement was due to subscriptions, auto repurchases, and daily expenses.

“And it’s a lot harder when you’re looking at so many transactions. Digital receipts [is] a single point of reference. It’s reducing the number of accounts that somebody has to go log into to make sense of their finances because it’s all right there in front of them. So, they can do everything in their app directly.”

Facilitating Subscription Management

Subscription management was another key feature consumers are increasingly requesting. According to Ethoca’s findings, 85% of respondents want to manage their subscriptions through their banking app. Having the ability to pause their subscription through their banking app was also important for 57% of respondents, and slightly fewer (52%) said they would like the ability to cancel their subscription in their banking app.

Rimple explained that by having subscription controls featured within a digital banking app, customers can have more visibility and control over their subscription payments. By giving cardholders more insight and control over their subscription payments directly within the bank app, you’re giving them more control over their finances and making sure any requests about a subscription—inquiry or even a cancellation—goes right to the merchant instead of the dispute process. 

How Are Subscriptions Affecting Business?

When it comes to subscriptions as a business model, more businesses are jumping onto the bandwagon and adopting the model to bolster their revenue.

“We have a formal forecast on recurring payments and subscriptions, and the estimate that Javelin makes for recurring payments and subscriptions is that it’ll pass the $800 billion mark by 2025,” Riley said. “So we’re talking about a lot of transactions with a wide range.”

“Actively managing that relationship with the customer is essential. (When) we’re talking about that kind of volume, being able to make sure things fit and being able to reinforce the business name comes into play. It absolutely helps with the disputes and managing that process.”

Although subscription-based business models cross a wide range of industries, they all have their challenges, such as chargebacks. With a “request a refund” feature, customers can connect with the merchant if there is a problem, minimizing consumer calls to the bank, which can ultimately become a dispute. Ethoca found that 50% of respondents would be interested in this feature.

Businesses looking to adopt a subscription-based business model need to anticipate and prepare for potential roadblocks.

“We see a lot of recurring transactions/subscriptions turn into disputes,” Betts said. “And we know that’s not the appropriate mechanism for managing your subscription because it’s not giving any clear indication to our merchants that the consumer wants to change their subscription terms.”

Enhancing the Digital Experience Can Benefit Businesses in the Future

There’s no question that customer retention depends greatly on the customer experience. That’s why adopting a digital experience to meet customers where they are is key.

“These new technologies and services that we’re seeing have the potential to really change how both our card issuers and merchants manage customer relationships,” Betts said. “It moves the dispute process upstream, helping to reduce unnecessary disputes, which is a much easier and faster process for consumers.”

Merchants that leverage emerging technology have an opportunity to be in direct contact with their customers.

“It’s hard to make a business case not to digitize your payment receipts, but it’s a natural outgrowth of so much that we do,” Riley said. “When you put yourself in the customer’s shoes, it makes life a lot easier.

“For the merchant, being able to have that extra touch with your consumer to keep satisfaction high is important, and that does blend into disputes, which is a direct cost save for all parties.”

The post The Tools Unlocking Next-Gen Digital Banking Experiences  appeared first on PaymentsJournal.

Banks and fintechs grappling with increasing identity fraud levels need to take care not to alienate their customers in the process of fighting it. From the call center to high-level task forces, all stakeholders should explore techniques that foster customer buy-in, rather than solely concentrating on the banks’ needs.

During a recent PaymentsJournal webinar, Ubiquity’s Chief Operating Officer Corey Besaw and Javelin Strategy and Research’s Director of Fraud and Security Tracy Kitten, discussed the challenges customer support and dispute investigators face when it comes to account takeover (ATO) fraud, how Ubiquity is working with partners to help identify fraud rings, and how financial services providers are adapting to thwart fraudsters.   

The Latest Schemes

A Sift Science report, which published in September, found that fintechs saw ATO fraud attacks up 800%. One thing that tells you is that fraudsters are getting a lot more sophisticated and organized in their approach, leveraging social media to increase the effects of their attacks by procuring identities or even dormant accounts in some cases.

Fraud rings are lurking throughout various organizations and Ubiquity has seen them increasingly being set up at call centers.

“One way that this plays out is often a fraudster pretending to actually work for the bank,” Besaw said. “Someone will call up and say, ‘Oh my gosh, I’ve spilled coffee on my keyboard and my boss is so angry with me and I’ve got this account that I need to unblock.’”

“It’s interesting because they’ll definitely have inside knowledge,” he said. “They’ll know the names of systems that they’re using or (specific) tools, and they’ll even be able to help the agent navigate those tools.” 

Besaw also identified a trick called double dipping, where fraudsters get access to accounts often with stolen identities and transfer legitimate funds to those compromised accounts. In this scheme, the criminal will make purchases, such as electronics, that they can sell for relatively close to the price paid for them on a secondary market. Then they’ll dispute every transaction in the hopes that they might get a provisional credit on at least some of the accounts or some of the transactions. Even if the institution can prove that these weren’t valid fraud claims, it can be almost impossible to collect the funds. 

“One of the tools that we’re excited about listens to calls in real time and transcribes them,” Besaw said. “We’ve got some machine learning models that we’ve built as well as more simple triggers, so that if we see that someone is calling in and saying, ‘Hey, I work for this bank and I’m part of the quality assurance department, and I need you to do this or that,’ we can immediately send a message to the agents workstation to say that this is a fraud call. That’s a really good way to prevent social engineering attacks from working.”

The social media piece is such a crucial one to talk about it, not just within the realm of account takeover fraud, but fraud generally,” Kitten said. “We look a lot at scams here at Javelin and social media is one of the prime channels for that because it’s a direct way to communicate with consumers. “

There are also seasonal fraud tricks that banks should be aware of. Around the holiday season, fraudsters know that operations are more likely to get busy and even overwhelmed, increasing the likelihood of a provisional credit being granted. And during tax refund time there’s a lot of money moving into accounts and typically there’s an increase of legitimate disputes.

What the Call Center Should Be Doing

One critical thing that banks should be doing is empowering and educating their customer service staff—particularly as they have direct contact with customers and can make or break the experience. This is especially key because when fraud is involved, emotions run high.

“When you’re hiring customer service agents, you’re looking for people to create a good customer experience in the fraud call center space,” Besaw said. “But the first thing that you want that person to do is approach everything with a healthy amount of suspicion. We segregate high-risk calls, which would include dispute intake calls and calls on accounts that have suspected fraud transactions or unusual activity to an entirely different team.” 

It is a frustrating experience for a legitimate cardholder to have their account blocked, and they might well be angry about it. But fraudsters are often the angriest customers of all because it can be a good strategy to get the other person on the defensive. Call center agents know they should be asking some extra verification questions, but they might not do it if they think that the customer is already extremely angry and just going to get angrier. 

“The old adage ‘The customer is always right,’ is something that the fraudsters are really playing up to here,” Kitten said. “The urgency, the anger, not giving people time to stop and think, all this is a basic social engineering tool.”

Balancing Against Customer Experience

Fraud teams usually do not think about the customer experience, but customers spend a lot of time thinking about their ideal experience. If they have a bad customer experience at a particular financial institution, there are ten others that they can easily move to. 

“If you’re putting a temporary block on an account, you can’t have a process that requires someone to wait days or a week for that block to be removed,” Besaw said. “Otherwise, you’re just going to lose customers, which is going to be as expensive as fraud losses, if not more.”

It’s important to make sure that your agents are well trained, that you trust them, and that you empower them to make the right decisions. Much of Ubiquity’s training revolves around teaching people how to look for signs of deception and identifying whether they think that there’s a reason to be suspicious or not. Nevertheless, a strong customer experience will necessarily allow a certain small amount of fraud to happen. At the end of the day, Besaw points out, you could stop all fraud by preventing anyone from making any transaction ever. 

“You want to settle on the side of unblocking a handful of accounts that you later wish you wouldn’t have rather than going hard in the other direction, where you’ve got lots of legitimate customers whose accounts you don’t unblock for an extended period of time,” Besaw said.

Fraudsters tend to adapt quickly, so it’s important to make fraud detection an ongoing process. Everyone in the customer service environment—whether they’re part of the fraud team, the general customer service team or the disputes team—needs to be aware of the key things that are happening in the fraud space. Even those who aren’t primarily in a fraud role should be getting a short 30-minute training every month to understand what they should be looking out for. 

Conclusion

A task force composed of a senior fraud investigator, someone that owns the customer experience, someone that is coming with the analytics that have been done, and potentially some other specialists depending on the circumstances, is something that every organization should consider, according to Besaw. This group should meet regularly with a mandate to both manage account takeover fraud risks, while balancing that with the customer experience.

He also recommends compiling and analyzing all the ATO cases for this task force. They should understand how it happened and what your fraud cases might have in common. That’s a critical step toward defeating the problem.  

The post New Techniques in Fighting Identity Fraud appeared first on PaymentsJournal.

With new data standard formats taking hold (ISO 20022) and customers increasingly expecting real-time payments, this is a critical time for banks to modernize their processes. Increasing speed and convenience for customers while implementing cost reductions isn’t easy to do, but that’s what banks should aim for in the coming year.

During a recent PaymentsJournal webinar, Stuart Bain, Senior Vice President of Product Management at Alacriti, and Brian Riley, Director of Credit and a Co-Head of Payments at Javelin Strategy & Research, delved into the current trends in loan payments, the influence of credit card debt and consolidation in the market, and what bankers should consider in 2024 as they modernize their payments. 

Pressures Affecting Credit Usage

Amid lingering inflationary concerns, widespread talks of a gloomy retail season have emerged. Consumer stress is palpable, budgets are strained, and bankruptcies are starting to rise again. Concurrently, delinquencies have surged to double the 2021 levels, painting a challenging landscape.  

”Credit card debt consolidation can be a good strategy for consumers because it allows them to go from a high-interest product to something that’s more planned,” Riley said. “But on the other side of the coin, people don’t always close those accounts after consolidation. If the economy starts to sour next year, consumers will still have that credit available.” 

“August saw a decline in non-revolving lending, which was down 9.8% on the year. It could just be people paying off loans,” Bain said. “Perhaps people are paying down their consolidation loans but switching back to using their cards, and card usage will increase.

“The Card Competition Act [still pending in Congress] might change the way we see loan payments processed, specifically towards credit cards. But I don’t think it’s going to impact as many card issuers as the original Durbin Act. If you look at the regulation, it’s targeting basically just the top 10 banks.” 

Real-Time Now

From a payments perspective, the imperative phrase is “go real time or go home.” Consumers have come to expect instant gratification. Waiting two to three days for a payment to post to their loan, their credit card, their mortgage, etc., is considered old-fashioned. This applies not just to loan payments but also to person-to-person payments or account-to-account transfers. 

“We see feedback from prospects and clients saying they need to make that whole process faster for their customers or members,” Bain said. “If customers can move money essentially in real time from PayPal to their bank account, why can’t they move money from one account to another in real time?” 

To accommodate these expectations, payment service providers need to be able to look up accounts in real time, get balances in real time, and settle in real time. And customers expect their payments to be reflected in real time. 

“We see banks decide they’re not going to post this payment until the money actually shows up, which is a very old-fashioned view,” Bain said. “People need to get their heads around the mindset that you need to decouple the payment data from the actual dollars. The money is going to show up, but you should be using the data to apply the payments rather than waiting for the actual dollars to arrive.”

True real-time processing is likely to have a sizable impact on credit cards. Customers will start asking themselves, “If I make a payment, when do I get to spend that money again? If I make a payment this morning, can I go out and spend the $363 this afternoon?” Credit card issuers will need to respond to the changes that real-time posting of payments will bring.  

Keys to Modernization

What should bankers do to modernize their processes and technologies? Bain outlined six areas to keep in mind:

• Speed and convenience across the value chain are paramount. 
• Banks should seek full visibility of a transaction rather than just firing a payment off into a black hole and chasing the biller to find out whether it’s posted. Immediate availability of funds ties back to faster payments. 
• Consumers expect real-time solutions like PayPal and Venmo. If an organization’s core is not up to date, it is limited in how it can manage these things. 
• New standards are coming. With the Fed’s move to adopt ISO 20022 across the board, some of the banks Alacriti works with have started diverting budgetary funds toward accomodating the upcoming changes.
• The regulatory environment will take a bite. The Consumer Financial Protection Bureau will look at the junk fees for things like delinquency, but it will also move beyond credit cards to other types of fees. We may start to see state regulations address some of those fees that regulators view as onerous for consumers. 
• Cost reduction is top of mind. A lot of legacy technology stacks are expensive. They run on big, expensive IBM hardware that has to be hosted and maintained by people. Those overseers are not quick to adapt the change cycle on some of these legacy products, which are measured not in months but rather in years—and require specialized sales stats. For the organizations still running mainframe-based platforms, the people who can program COBOL are retiring and are not being replaced by new people with the same knowledge. 

“Once you have some of these things in place, you can start to accelerate innovation,” Bain said. “There are interesting concepts about how to create new payment experiences. Would somebody come along and start to issue a new decoupled debit card because they can check the balance on the account in real time?”

Alias-Based Payments

Alacriti also expects growth in alias-based payments. “If I needed to send money to anybody here, I’m not going to ask you for your bank account or your debit card,” Bain said. “I’m going to ask you for your email, for your cellphone number, and then try and work out which network you’re on. One thing that we’re starting to get asked about is, ‘Well, why aren’t these networks interoperable? Why can’t somebody on PayPal send money to somebody on Venmo without having to go through all the hoops of transferring all the money around?’

“It would be interesting to see whether that sort of alias network interoperability comes to the fore. Can PayPal play nicely with Venmo such that the money becomes interchangeable and interoperable?” 

The post What’s Driving the Future of Payments appeared first on PaymentsJournal.

Bank connectivity and payment processes are critical operations for any business. With the introduction of multiple banking relationships, payment processes have become increasingly complex, requiring more internal knowledge and even external expertise.

In a recent PaymentsJournal webinar, Jonathan Paquette, Senior Vice President of Solutions in the Americas at TIS (Treasury Intelligence Solutions), and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, delve into the most common hindrances to bank connectivity and payment strategies, the consequences of not optimizing bank connectivity and payment management on a global scale, and key strategies in implementing bank connectivity and payments effectively.

Common Challenges to the Implementation of Efficient Bank Connectivity and Payment Strategies

According to Paquette, companies typically have multiple bank relationships. Each bank has its own protocols, payment methods, and formats. Bringing all of these elements together under one single and unified connectivity strategy poses a significant challenge. To address these connectivity protocols, organizations have resorted to using outside resources or relying on their internal knowledge base to manage all of these elements.

Another issue is the complexity of systems. The implementation of global bank connectivity and payment processes requires them to be integrated into a back-end system.

“A lot of companies are multi-ERP,” Paquette said. “I think at the minimum a company is going to have an ERP system, likely a TMS. Also, a payroll application, and each one of those systems is going to need to leverage that communication to the bank or have their own independent communication channel to the bank, too. So that’s a big consideration for a lot of companies.”

Paquette added that a designated person who is well-versed in these matters will be best suited to put connectivity strategies into place.

Lack of internal knowledge is another issue organizations face. It becomes increasingly complex to maintain different formats and the various connectivity protocols among the vast number of banking relationships. The revolving door of banking relationships and the IT bandwidth required to support those changes add more complexity to the process.

“And I’ve been very outspoken with our large corporate clients about the need to have external expertise because I’m finding that even some of the largest corporations in the world don’t have the resources to do this type of thing,” Bodine said. “And it is just a bear to manage all this.”

The Consequences of Not Implementing Connectivity Processes Fully

It is not recommended that organizations attempt to implement connectivity processes in a partial or fragmented way. Doing so could lead to a host of problems. Paquette has seen this firsthand, revealing that route inevitably leads to a partial automation of the process. Cash management banks might process 60% to 70% of their transactions via bank connectivity and payments and decide that this requires a tremendous amount of work, thereby ending it there. However, the remaining 30% to 40% still needs to be processed manually. This introduces the possibility of human error as well as security risks.

There is also the question of data aggregation and analysis. Many times, the data is siloed into different sources.

“If some things are flowing from the ERP straight through processing and others are going through an e-banking portal or some other system, right then you’re suddenly finding yourself with all these sort of data silos,” Paquette said. “No way to bring all these data points together for analysis purposes and to make your business better.

“So, all the usual ones, excessive costs, the maintenance and the upkeep of multiple different processes come into the fold as well.”

Said Bodine: “I was writing recently about the costs and the downsides associated with halfway strategies, as I like to call them, and people sort of do the bare minimum and then they forget about it. But they’re not focused on continuous improvement like a full API first strategy or ISO standards to the extent that they are standards, but those are super important.”

Key Strategies for Optimizing Connectivity

The solutions to enhancing the implementation of connectivity will greatly depend on the level of complexity within the business. For example, if it is a treasury operation with one or two banking relationships, then one or two systems would be recommended to connect with. It can potentially be managed in-house as well.

“If you do have resources that are really knowledgeable about this or maybe just the opportunity to bring in some process redesign consultants or bank connectivity experts who can help you get everything connected up through whatever method you might have,” Paquette said.

“Maybe your ERP has a connector and can centralize all this information in.”

For companies that have more than 100 bank relationships worldwide, outsourcing is recommended for this task. With that many banking relationships, it’s inevitable that inconsistencies will be high. Maintaining different formats daily to execute transactions will be a daunting task. Many of these strategies can be reined in by using a connectivity hub where most tasks would be managed by a specialist in a unified place.

TIS Helps Companies Understand Their Payments Process

Paquette noted  that it’s vital for companies to understand the way they make payments. It is important that organizations get familiar with how their ERPs send files to the banks, know the inventory of all the e-banking portals available, and be familiar with the manual payment processes that are occurring.

One recommendation he makes to clients is to map out all of these variables. Businesses must process payments in an efficient, secure, and cost-effective manner. Finally, once all of these details are mapped out, organizations must determine what knowledge base they possess internally. If they are missing elements of that knowledge base, the next step is to seek external expertise.

The post Bank Connectivity and Payment Processes Must Follow Best Practice Protocols appeared first on PaymentsJournal.

Early Warning® has been at the forefront of developing financial technology solutions for more than three decades. Early Warning’s success can be traced back to its ability to excel in mitigating risk and establishing trust. By partnering with well-established banks and credit unions, the company also gave rise to one of the most successful P2P payment solutions today: Zelle®.

Early Warning began as a specialty consumer reporting agency, helping financial institutions know the status of demand deposit accounts and now looks to reimagine e-commerce and the consumer checkout experience again with the launch of Paze^SM, a new digital wallet.

In a recent PaymentsJournal webinar, Early Warning’s VP of Product Management, Robin Love,  Ryan Riveland, VP of Market Development at Early Warning, Paze’s VP of Product, Matt Miller, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, dig into how the company has helped shape the financial industry and the profound impact Paze will have on banks and credit unions.

Establishing trust between consumers and financial institutions is essential

As challenges in the financial realm evolve, banks and credit unions must balance risk management and customer support using advanced identity and payment risk tools.

“Early Warning offers a suite of services that are leveraged by thousands of institutions, agencies, and merchants across the country to help prevent not only synthetic identity fraud but mule detection, as well as the ability to determine if the applicant is likely to commit first-party fraud or default on the account,” Love said.

“From the best-practice perspective, I think they just need to have the right tools in their arsenal to ensure that they’re really identifying that this individual is who they say they are.”

Zelle® and Paze Have Their Distinctions

Zelle® and Paze are notably different products addressing entirely different sectors and use cases. Zelle® supports a use case that helps small businesses that exclusively used cash and checks for their daily operations. Zelle® was made available to eligible small businesses as a result of research conducted by Early Warning which revealed that 80% of small businesses surveyed did not accept cards as a form of payment.

“Zelle® is focused on digitizing check and cash, and that is not necessarily a Paze principle,” Riveland said. He added that Zelle® was never intended for the purchase of goods but rather for P2P transactions and small-business services.  Furthermore, Zelle® is embedded within the mobile banking apps of participants in the network to boost consumer engagement within the apps.

Paze, on the other hand, is an easy-to-use digital wallet that consumers can use for e-commerce purchases. Because Paze is offered by banks and credit unions, consumers can access their debit and credit cards from all participating financial institutions in the network. Miller explained that because the bank can already authenticate customers, there is no need for them to create another identity or download another app.

On the merchant side, Paze leverages the relationship already established via the bank to provide a more enhanced front-end experience, eliminating the friction typically seen in online checkout.

How Paze Aims to Change the Payments Industry

Paze is set to launch to all eligible consumers in 2024 and is anticipated to be a game-changer in the digital wallet space. Currently, Early Warning is partnering with large institutions that will help scale Paze much in the same way that Zelle® has been able to scale for more than 2,000 financial institutions.

Paze is launching in 2023 to a limited consumer population ahead of general availability. The rollout will primarily focus on consumers who are actively shopping online.

The goal is to also bring Paze to consumers and spotlight the security aspect, particularly as it’s supported by the many financial institutions those consumers know and count on.

“It’s about finding the opportunity to reduce that key component of friction, which is establishing a new relationship with the consumer either in the form of guest checkout or in the form of account creation,” Miller said.

Scaling Paze

Paze is set to fully launch this fall and is anticipated to be a game-changer in the digital wallet space. Currently, Early Warning is partnering with large institutions that will help scale Paze much in the same way that Zelle has been able to scale for more than 2,000 financial institutions.

The company is also working with a closed group of individuals to test and expand Paze for a full launch starting this fall and into the following year. The rollout will primarily focus on consumers who are actively shopping online.

The goal is to also bring Paze to consumers and spotlight the security aspect, particularly as it’s supported by the many financial institutions those consumers know and trust.

“It’s about finding the opportunity to reduce that key component of friction, which is establishing a new relationship with the consumer either in the form of guest checkout or in the form of account creation,” Miller said.

What’s Next

Paze is one of many solutions that is bringing banking, merchants, and consumers together, facilitating fast, efficient, and secure payments. With the help of its parent company, Early Warning, Paze leverages decades of experience, a suite of services, and extensive banking relationships. Those resources will be pivotal to its scale and expansion.

©2023 Early Warning Services, LLC. All Rights Reserved. Zelle and the Zelle marks used herein are trademarks of Early Warning Services, LLC

The post A Digital Wallet Game-Changer? Paze^SM Is Ready to Reimagine the E-Commerce Experience appeared first on PaymentsJournal.

Fraudsters are becoming increasingly sophisticated in executing fraud in real time, and many financial institutions still struggle to combat this issue. In the past year alone, roughly two-thirds of financial institutions have encountered various forms of fraud attempts¹.

Some banks and credit unions have turned to fraud risk platforms, particularly in helping with real-time decision-making for countering check fraud, wire fraud, and ACH fraud. However, smaller financial institutions face particular obstacles in assessing transaction risks, mainly due to their limited access to account information for a small segment of the population.

Recognizing this issue, Early Warning^® is the trusted custodian of a consortium database model that helps level the playing field. The model aggregates financial information from a network of over 2,500 financial institutions in the United States encompassing 65% of all bank accounts. By leveraging a comprehensive dataset, even the smallest financial institutions can develop sophisticated fraud models, assess the risk profile of a new customer based on historical behavior at other banks, and offer tailored strategies.

During a recent PaymentsJournal webinar, Benjamin Chance, Chief Fraud Risk Management Officer at Early Warning^®, and Brian Riley, Co-head of Payments at Javelin Strategy & Research, discussed how becoming part of a consortium data-sharing model can help banks and credit unions optimize their fraud risk platforms for real-time decision-making aimed at stopping fraud.

The Lay of the Land

Traditional fraud management systems rely on “yes” or “no” binary decision-making, which can be manipulated by fraudsters.

“With a binary system, if there are five risk factors evaluated for a potential fraud concern, each factor may pass marginally,” Chance said. “However, when these factors are considered together, it becomes clear that the customer should not be approved, or additional identity verification is required. Traditional approaches often result in high rates of false positives (booking fraudsters) and false negatives (not booking legitimate customers).”

When determining if a transaction is fraudulent, a financial institution needs to consider several questions, including:

• Is the applicant’s identity real?
• Is the person who they claim to be?
• Is the business allowed to do business with the person?
• What are the risks of opening the account or fulfilling the payment?

The institution should evaluate these risk factors to determine if it should do business with the individual, and that process should include screening against relevant databases. By incorporating attributes from each layer of the evaluation into a decision-making model, financial institutions can establish the presence of a trusted identity—or have sufficient reason to deny one suspected of being fraudulent.

Early Warning’s risk model can also predict how likely it is for money to be returned to a person’s bank account within the next 30 days. To make these predictions, the model looks at various data related to the account, such as its status, checks, ACH transactions, and past return information. It uses a type of machine learning with high accuracy to minimize false alarms.

The model is designed to catch 50% more potentially problematic situations while also reducing the number of false alerts it gives for legitimate cases by 50%. That significantly increases fraud detection while minimizing friction.

A Consortium-Based Model

It’s helpful for financial institutions to have the largest possible datasets for fraud prevention. To that end, Early Warning^® is the Trusted Custodian^® of the National Shared Database^SM Resource, a consortium and data-sharing model. Participating institutions contribute consumer permissioned information about accounts, owners, personal attributes, and risk history—and they can access all the data from the pool to make informed decisions when opening new accounts or managing existing ones.

A small bank has access to risk scores of new customers based on their history at other banks and credit unions. Consumers who have a few risk factors may be offered specific strategies like overdraft protection based on their historical risk, while low-risk individuals can enjoy full access to account features.

“With 675 million deposit accounts and 604 million account owners, we have a vast amount of data to work with,” Chance said. “Our advanced analytics capabilities allow us to incorporate data from multiple institutions and identify patterns and trends. This helps us understand account lifecycles, check history, deposit patterns, and more. We can determine if a check is legitimate based on previous account history and risk factors.”

That is important, as checks are not going away—although the way they are used may be changing.

“The demise of the check is greatly exaggerated,” Riley said. “I’ll always have a checking account to do things like pay specific purchases, and I think consumers are very similar to that. The big change is that the average value of checks is increasing, so fraud models have to change accordingly.”

Conclusion

The fraud landscape is constantly evolving, and financial institutions need to keep up with the changes and refresh their fraud models regularly. The National Shared Database^SM Resource from Early Warning^®, which includes data from a wide range of financial institutions, makes that ongoing improvement easier by spreading knowledge throughout the financial ecosystem. With billions of transaction records, the database enables the building of sophisticated models and facilitates robust fraud prevention across the industry. With these models, financial institutions can have confidence that they are using the best possible data and models to stamp out fraud in the most successful way possible.

¹2023 AFP^® Payments Fraud and Control Survey, AFP^® 

The post Consortium Approach Dramatically Improves Fraud Risk Models appeared first on PaymentsJournal.

Chargebacks continue to be a challenge for many merchants. While some might slough them off as just the cost of doing business, chargebacks can ruin a company, not just its bottom line.  

Merchants must consider investing in fraud detection and other preventive measures to ensure that excessive disputes do not occur.

During a recent PaymentsJournal webinar, Justin Clements, Director of PR & Media Relations at Chargebacks911, Jarrod Wright, VP of Marketing at Chargebacks911, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, discussed key findings from Chargebacks911’s 2023 Chargeback Field Report.

Roughly 300 merchants participated in the survey, which offers a glimpse into the current chargeback landscape and illuminates some of the biggest concerns. In addition to surveying merchants, Chargebacks911 also polled consumers about their concerns to gain an accurate understanding of the trends.

How Companies Are Tackling Chargeback Representments

Chargeback representment is the process of fighting a false payment card dispute. It involves providing evidence to the bank to establish not only that the transaction was valid but also that the cardholder’s claim should be overturned.

According to the 2023 Chargeback Field report, 70.1% of businesses manage their chargeback representments in-house. That’s a substantial increase from a year prior, when just under 50% of businesses indicated as much. By contrast, 15.7% of respondents said they used software solutions, while slightly fewer, 13.4%, said they fully outsource chargeback representments.

The majority of chargeback representments are delegated to accounting and finance departments—or, in many cases, a dedicated team.

“From business to business, it varies wildly,” Wright said. “The people responsible for chargebacks changes from almost every organization.”

Biggest Challenges to Chargeback Management

There are many reasons chargebacks are not mitigated head-on. Some businesses don’t see them as a problem, while others find that tackling disputes takes too much time and resources away from other business strategies.

According to Chargebacks911, one of the biggest obstacles identified by merchants was winning chargebacks.

“Even when you come in the representment process with all the evidence that you can, it’s still an uphill battle,” Clements said.

Identifying false positives is yet another issue. “Identifying friendly fraud and false positives are two sides of the same coin,” Wright said. “And the merchants that that we speak to, that’s the sort of problem that most of them realize they’re having. They have a bucket of chargebacks, and they’re not 100% sure whether the chargebacks are being caused by criminal fraud.

“It’s sort of a shared hybrid merchant error, friendly-fraud type of chargeback, or it’s a classic case of first-party misuse or friendly fraud. One of the things that merchants can do to reduce chargebacks is increase the scrutiny for transactions and pre-transaction filters.”

Wright warned that merchants can be too aggressive when it comes to mitigating potential fraud, an approach that can produce a surge of false positives. Identifying the underlying causes that are contributing to the dispute problem is important. Some common causes can be attributed to shipping delays, a fault within the customer service process, or having a fraud liability.

“I’m particularly interested in the focus on wanting to win more, which I think is very reasonable,” Keyes said. “No one likes to lose in any situation, certainly not on chargebacks. But it makes a lot of sense. You ask merchants, what do you want the most? You’d like to win more of your cases. And I think that’s often a misunderstanding of how chargebacks function from the merchant perspective. Merchants want to have no chargebacks, they want no fraud, and to win every chargeback that does pop up the same way.”

“When you’re operating as a merchant, it’s unrealistic not to have some chargebacks,” Keyes added. “It’s unrealistic not to have fraud. And you need to accept that sometimes those things happen and sometimes you lose because things go wrong, and that’s normal. Your priority should be minimizing them in the first place and making sure they’re handled as effectively as possible.”

Chargeback Reduction Solutions

Three pre-chargeback resolution solutions are typically used on the market today: Chargeback Alerts, Network Inquiries, and Rapid Dispute Resolution (RDR).

Chargeback Alerts is a legacy system that enables merchants to avoid a dispute, provided they’re willing to refund the transaction. Merchants using this tool reported an average reduction of 27% in chargebacks.

As a newer tool—and provided that the merchant is enrolled—Network Inquiries ensures that the issuing bank can send a request to the merchant to provide additional transactional information that can help the merchant refute and represent the transaction. This information can be submitted in real time. According to Wright, the tool is very effective in reducing disputes, with an average reduction of 24%.

RDR uses the Visa network to automate refunds instead of receiving a chargeback. The merchant can set up rules and set up specific parameters, dictating which disputes to automatically accept and issue refunds to the cardholder. It’s a less expensive solution and is widely available to all issuers on Visa transactions. The average reported reduction after using this solution was 42%, the highest of the three chargeback reduction solutions.

Why Businesses Should Consider Chargeback Reduction Solutions

Although one can argue that fraud, and especially disputes, cannot be completely avoided or mitigated, it is important to implement solutions to reduce the incidences.

A dispute mitigation plan can help businesses put effective solutions in place that lower the incidences of fraud, regain losses, and prevent ongoing disputes.

The post Why Merchants Shouldn’t Underestimate Chargebacks appeared first on PaymentsJournal.

The integration of embedded payments presents software providers with great opportunities for growth. By capitalizing on convenience, customization, and streamlined processes involved in embedded finance, organizations can improve customer retention rates, increase revenue streams, and enhance overall customer value.

With the embedded finance market projected to reach $800 billion by 2030, embracing this technology is not just an option but also a necessity for business platform companies looking to thrive digitally.

In a recent webinar hosted by PaymentsJournal, industry experts Ralph Dangelmaier, CEO of BlueSnap, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, explored the transformative impact of embedded payments integration. This article delves into the advantages of embedded payments for software providers, the considerations involved in integrating payments, and how organizations can optimize the customer experience to unlock the full potential of embedded payments.

The integration of embedded payments presents software providers with great opportunities for growth. By capitalizing on convenience, customization, and streamlined processes involved in embedded finance, organizations can improve customer retention rates, increase revenue streams, and enhance overall customer value.

With the embedded finance market projected to reach $800 billion by 2030, embracing this technology is not just an option but also a necessity for business platform companies looking to thrive digitally.

In a recent webinar hosted by PaymentsJournal, industry experts Ralph Dangelmaier, CEO of BlueSnap, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, explored the transformative impact of embedded payments integration. This article delves into the advantages of embedded payments for software providers, the considerations involved in integrating payments, and how organizations can optimize the customer experience to unlock the full potential of embedded payments.

What to Keep in Mind as Payments Integration Is Considered

Software platforms looking to integrate payments should consider a few key factors: onboarding, the opportunity to scale their business, compliance and regulation, whether there’s underwriting and risk staging, and overall, how the solution can improve the customer experience. Let’s delve into each of these and how they can help organizations get the most out of embedded payments.

Onboarding

The onboarding process for software providers is straightforward: A merchant wanting to join a platform fills out an application form. As part of that process, the applicant provides additional data for things like identity verification and anti-money-laundering checks. This data is then sent to the platform’s onboarding system through special APIs.

“With this system, we can quickly onboard merchants in about 15 minutes, and they can start selling their products in 47 different countries almost instantly,” Dangelmaier said.

Some platforms make it mandatory for new merchants to sign up for payments as well. When merchants join the platform, they automatically get the payment services included in the price. “This is becoming really popular, and lots of merchants from different industries are joining these platforms in large numbers,” Dangelmaier added.

Opportunity to Scale

Software and technology platforms are increasingly incorporating embedded financial services as a requirement for new merchants. These platforms are not only signing up merchants for payment processing but also integrating it into their pricing.

This trend is attracting many merchants from different industries, and there is tremendous potential for growth in this area.

“This scalability is crucial for business expansion,” Dangelmaier said. “It’s not just about having a streamlined process that satisfies existing customers; it’s about having the capability to expand and accommodate the needs of new customers. This adaptability is what ultimately strengthens a business.”

Compliance and Regulation

Embedded finance also has built-in tax compliance and regulation offerings.

When it comes to moving money and dealing with payments, a lot of rules and regulations must be followed. It’s not just about setting up a technical system. Legal requirements can vary depending on the country.

“Just because you can make it work in the U.S. doesn’t mean it works in Mexico or the UK,” Dangelmaier said. “There are different underwriting risk rules in every country. We’re connected to dozens of tools around the world to make sure we comply with the underwriting and KYC (know your customer) and AML (anti-money-laundering) standards around the world.”

BlueSnap helps platforms manage these compliance issues by taking care of the regulatory requirements so the organization doesn’t have to spend a lot of money or hire a team to handle that task. Because the rules and regulations are different for each country, BlueSnap connects with various tools worldwide to ensure they comply with the specific rules of each country. Sometimes, the company has to physically check someone’s identity in certain countries before approving them for payments.

“You need to either decide, ‘Am I going to do that on my own, spending millions of dollars higher to comply with the regulations?’ or ‘Am I going to partner with somebody who already has the infrastructure set up?’” Dangelmaier said. “We take the compliance concerns away from the platform and take care of it behind the scenes.”

Visibility Into Underwriting and Risk Staging

Embedded financial services for software and technology platforms involve complex processes related to underwriting and risk staging. Compliance with underwriting risk rules and KYC and AML standards in different countries is crucial, and there are tools to assist with automatic verification.

However, exceptions may occur during the process, requiring additional attention and collaboration with the platform. Certain countries provide particular challenges of physical verification, which necessitate staged underwriting with conditional approval.

“In some countries, you actually have to do a physical check before you board them, so we conditionally approve them,” Dangelmaier said. “Then, we actually got to send (someone) maybe somewhere on a scooter to go verify that they actually are who they are and check their IDs.”

BlueSnap allows businesses to quickly onboard customers and give conditional approval for payments. After the conditional approval is granted, a final verification step can ensure that all necessary information is provided and verified. Alternatively, the conditional approval can be given and the loan processing can begin immediately, similar to how Uber starts processing a ride request as soon as it is confirmed.

Improving Customer Service

When platforms integrate payments, they provide a more convenient and seamless experience for their customers. Merchants no longer have to go to different places or hire experts to handle technical implementation. Instead, everything is handled within the platform. This is especially useful for small and medium-sized businesses.

“I can’t tell you how many people have to hire system integrators to get everything working and get it going,” Dangelmaier said. “If the platform provides a system integration as part of a turnkey solution, the customer experience is just significantly improved.”

Making this integration work smoothly requires three API connection points. The first one is the payment API, which allows customers to make payments. The second is the onboarding risk API, which ensures that customer applications are securely set up with the appropriate banks. The third is the consumption or webhook API, which provides data and reporting back to the platform. These APIs are like the different sections of an orchestra playing together harmoniously.

It can take some time and fine-tuning to optimize the platform for different countries, currencies, and payment types. Platforms like BlueSnap provide support and guidance to help businesses navigate this process and make the necessary adjustments.

The post 5 Ways to Maximize Embedded Payments’ Full Potential appeared first on PaymentsJournal.

In a recent webinar, Jeff Kump, President of CSG Forte, and Daniel Keyes, Head of Merchant Services at Javelin Strategy and Research, shared insights on how payments have progressed this year and what we can expect in the coming months. The key takeaway is that personalization and creating a seamless payment experience are the critical factors for driving customer loyalty.

In particular, this means offering a wide range of billing options, including real-time payments, automated billing, and buy now, pay later. However, businesses must navigate the risks associated with payment personalization, such as fraud and security. Working with a reliable payments partner can help address these challenges and support merchants in meeting evolving consumer preferences while maintaining security.

Rising Consumer Expectations for Payments

Before the onset of the pandemic, consumers primarily used cash, credit, or debit cards—regardless of whether they were shopping online or in-store. But in recent years, digital and mobile wallets have emerged, offering consumers more options at checkout.

“These alternative payment methods are here to stay and will become even more popular. Therefore, it’s crucial to consider these options when designing new payment experiences in the future,” Keyes said.

Consumers want choice—whether that’s paying via a digital wallet one day and paying with cash another time. And the implications of that choice are making it a bit more complicated for merchants, Kump says, to be able to accept all of the different payment methods and stay up-to-date with consumer expectations.

“We (conducted) a survey recently and we asked consumers how they would prefer to pay,” Kump said. “Nearly three-quarters of consumers said they would rather set up automated billing than receive a paper bill and then having to act on that.”

“This goes beyond just loyalty, beyond the ‘buy 10, get one free’ punch card,” he said. “It’s about knowing that consumer and how they link to interact with you.”

Personalization Can Drive Business

Although options like payments via text or interactive voice response are important, personalization goes beyond that. It involves understanding how each customer wants to pay and being able to adapt as their needs and preferences change.

“If a customer traditionally pays through a website but starts using text-based payments, it’s essential to respect that preference and avoid bombarding them with unnecessary emails,” Kump said. “Instead, it’s about evolving with the customer and demonstrating that you understand and respect their preferred mode of interaction.”

Merchants that don’t catch on to customer preferences can push those consumers away.

“If I’m a consumer who never pays over texts, and I keep getting these texts asking me to pay for something that’s frustrating, at the very least it doesn’t build a relationship—it can also damage one,” Keyes said.

Where to Begin

Companies may often look to create a seamless and frictionless payment experience for customers but don’t know where to find inspiration for designing that journey. According to Kump, they should look at Uber.

“Uber has set a trend and expectation by providing a seamless experience where customers can call for a ride, get in the car, and not have to worry about the payment process,” Kump said. “The payment happens in the background, making it less transactional and more integrated with the overall brand experience. This approach aims to enhance customer loyalty by fostering a positive and interactive interaction with the brand.”

There are many ways to reduce friction in payments. Instead of having to manually enter payment details on a website, businesses can provide a bill with a QR code that customers can scan to make a payment. Or, if a customer calls into a call center, they don’t have to read off their card number to an unknown individual. That experience can be enhanced so the customer receives a text message with a payment link instead of having to share card information over the phone.

Risks to Payments Personalization

When consumers make a payment online or over the phone, there’s often an associated risk. Personal information, including credit card details, could be intercepted by fraudsters. This consideration is especially important in call center environments, where agents may be working from home, making it harder for businesses to ensure the security of customer information. Customers may also be reluctant to share their sensitive information with call center agents who are working remotely.

“When customer service employees are in a less controlled environment, businesses aren’t able to see what their agents are really doing with the information,” Kump said. “From a consumer perspective, when you know that that agent may be working from home, you might be less willing to give identifying information or a credit card number to that agent.”

To address these risks, companies are developing payer engagement platforms that offer additional security measures for call center agents.

“Instead of taking payments over the phone, we can send customers a secure text message or link where they can make their payment,” Kump said. “The agent can stay on the line and guide them through the process if needed. This approach helps reduce the risk of compromised information and creates a more secure transaction for both the customer and the business.”

It also helps businesses minimize payment abandonment and build trust with their customers.

“Security measures are important to build confidence and protect against fraud,” Keyes said. “However, these measures can sometimes add extra steps, like two-factor authentication, which makes the process less smooth.”

It’s a difficult balance to strike, but it’s important to protect customers while ensuring their transactions are completed smoothly.

Finding the Right Payments Partner

To improve payment security while balancing digital and non-digital payments, merchants can benefit from working with a solid payments provider. This partner should offer ongoing support as the business and consumer preferences evolve.

“Security is crucial because a breach can damage the business’ reputation and incur significant costs,” Kump said. “It takes a considerable amount of time—around 277 days on average—to fully contain a breach.”

Dealing with fraud is complex, and merchants often lack the time and resources to address it while focusing on selling their products or services. A trusted partner can help detect and prevent fraud before it occurs, relieving the burden from the merchant.

“A good payments partner helps reduce the merchant’s PCI scope,” Kump said. “This not only helps comply with regulatory requirements but also provides peace of mind.” Additionally, a payments provider can assist in evolving the payment experience by implementing measures such as two-factor authentication, tokenization, and end-to-end encryption to create a more secure environment.

Lastly, it’s essential to choose a partner that can grow and adapt alongside the business and accommodate new payment methods and experiences without the need to switch providers every time a change occurs.

Conclusion

The payments landscape is continually evolving, driven by changing consumer expectations and advancements in technology. Merchants need to stay informed about the latest trends and adapt their payment strategies accordingly.

The influence of younger consumers, the diversification of payment options, and the growing preference for automated billing are key trends to consider. Personalization and creating a seamless payment experience have also become crucial for driving customer loyalty.

Working with a reliable payments partner can help address these challenges and support merchants in staying current with their customers and their security needs.

By staying informed and proactive and by partnering with the right payments provider, merchants can navigate the dynamic payments landscape and thrive in the second half of 2023 and beyond.

The post Personalized Payments Will Help Merchants Stand Out in 2023 appeared first on PaymentsJournal.

Cloud-based payments are increasingly popular with banks as they look to keep up with customer and regulatory demands as well as the rising competition from fintechs.

During a recent webinar, Jagdeep Singh Sahota, Chief Payments Officer and EVP at Banc of California, Tanvi Patel, Director of Payments at PwC, Deepak Gupta, SVP Global Head of Payments as a Service at Volante, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, explored the rising popularity of cloud-based payment solutions, their use cases, and how banks can migrate to the cloud without disrupting their daily operations.

The Shift to Cloud-Based Payment Solutions

Though many banks operate using legacy solutions, the days when this framework will sustain the need for faster payments may be ending.

“The old days of sending a file through a batch to be processed in a data center is becoming antiquated,” Sahota said. “For banks to provide contextual payment services, they need to be in the cloud, and they need to adopt that same scale of service and same infrastructure environment for connectivity reasons.”

Patel noted that with the upcoming launch of FedNow, a lot of new additional rails will be coming in along with products and services. “Banks are seeing that we need to turn this around,” she said. “In talking to banks, they say, ‘I want to go to market quicker with this product. I need to get this service to my client or this segment that I’m trying to target faster.’”

Benefits of Cloud and Payments-as-a-Service Solutions

The current banking landscape looks a lot different from what it did decades ago. Banks are having to do more with less—and within a shorter timeframe. There’s also competition from fintechs—initially on the business-to-consumer (B2C) side, but that has now moved into the business-to-business (B2B) area. And on top of that, new payment types are making their way into the market, and current legacy systems are unable to support those new forms.

Cloud and payments-as-a-service (PaaS) solutions can address these pain points. “They (cloud and PaaS) make payments simple for banks. They allow the banks to transform their payment infrastructure without having to worry about the IT burden which comes with it,” Gupta said.  

“PaaS provides benefits on the cloud side, on the infrastructure side, on the scalability side, and on the resiliency side. It allows banks to focus on their business, which is serving their customers.”

These solutions also provide banks with another critical factor: a 360-degree view of customer payments. Traditionally, banks have had multiple systems to support multiple payment types— including an ACH system and Fedwire—and that has often led to inefficiencies. But a full 360-degree customer view breaks down those silos, optimizes the payments structure, and increases operational efficiency.

Use Cases of Banking as a Service and Software as a Service

As previously mentioned, there are many benefits to using cloud and PaaS solutions. But it’s also important to note that software-as-a-service (SaaS) and banking-as-a-service (BaaS) solutions can also help banks enhance their payments capabilities.

“You’re using these APIs and your cloud enablement as a bank to bring those differentiated solutions faster to market,” Patel said. “You’re not going to rip and replace your entire payment ecosystem because that is the heart of your bank.

“We also have to make sure that we are adhering to all our regulatory commitment and putting proper governance structure around it.”

Patel mentioned that some use cases for these solutions can be found in real-time payments, should a bank want to niche this capability. Another use case can be for payments as a service. Others may opt for an integrated marketplace or an APR solution.

Patel summarized her thoughts by indicating that most banks are still testing the waters with these solutions, looking to adopt the functionalities that make the most sense for them.

How Banks Can Approach Cloud Migration

When new technology is adopted, having a strategic approach in place is crucial. And before fully diving in, banks must ask key questions to figure out which tactic they should implement.

“Start by asking yourself, ‘What am I solving? What journey am I trying to achieve for my end user?’ Prioritize how you are going to do it,” Patel said. “We will never do a big-bank approach. … Don’t get me wrong, there are big banks who’ve done it, and if you have the tech stack, you have the skill in-house, and you have the buy-in from your leadership, go ahead.

“But if you do it piecemeal, and you do it with targeted use cases, risk rate them to determine which is more risky and which is going to have the most severe impact on my client’s current experience.”

Patel said banks must determine if the organization as a whole is ready for the new implementation. This includes checking to see if there has been sufficient internal and external education about the migration. Having sufficient training and education within and without the organization can ensure that the transition will be as smooth as possible and without any friction inflicted on customers.

Conclusion

Banks realize that the demand to cut costs and provide timely products and services based on customer demands is the key to thriving in an ultra-competitive market. Cloud-based payment solutions can keep banks nimble and cost-efficient, boost profitability, and enhance customer satisfaction.

Sahota emphasized the importance of knowing the customers’ pain points and not focusing on building the solution in-house. It’s important to identify the value that will be offered with the solution, and likewise what will derive value for the organization.

The post How Banks Can Harness the Power of Payments as a Service and Cloud Payments appeared first on PaymentsJournal.

Banks have long been the main facilitators of international fund transfers. For decades, their wire transfer systems and correspondent banking relationships were the primary mode of transit for cross-border remittances. However, recent technological advances and regulatory changes have enabled financial challengers to rise through the ranks quickly and become the primary source for consumers to send money abroad promptly. As global remittances are projected to surge to $974 billion in 2022, it is no surprise that more organizations are looking at remittance as a substantial revenue stream. 

But why have traditional financial institutions seemingly relinquished leadership within the field, leaving the door open for non-traditional financial intermediaries to meet consumers’ needs? Similarly, will banks risk losing additional revenue opportunities with cross-border payments due to outdated infrastructure?

A recent webinar discussion between Hal Ramakers, SVP of Global Solutions at Brightwell, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, examined:

• The explosive rise in demand for cross-border payments
• The complexity of moving funds across borders
• Solutions that support banks’ expansion into the global payments industry

The rising demand for digital cross-border remittances

The demand for digital cross-border remittances is increasing in tandem with globalism. Migrant workers need to send money back to their home countries to support their families, while businesses are outsourcing and expanding internationally, necessitating the need to pay contractors and supply chain vendors across borders. Additionally, many industries, such as the maritime industry, rely on foreign workers. In the cruise industry, for example, more than 95% of workers reside outside the U.S., requiring cruise lines to pay employees through multiple payment rails.

“As we look at the data, the peer-to-peer payments market makes up 2% of the volume of money moved globally, followed by 5% for consumer-to-business, and 7.9% for business-to-consumer,” Ramakers said. “But the biggest opportunity for cross-border payments sits within the business-to-business market, where checks and wire transfers are still widely used.”

Simultaneously, we’ve hit an inflection point where consumers expect to access services digitally. Banking customers want to conduct transactions within the same mobile apps they receive their paycheck.

“Providing an embedded solution to consumers where they are already conducting their business has intrinsic value,” said Ramakers. “An embedded solution reduces complexity and makes the payment process more seamless by eliminating the need to provide payment details elsewhere. Customers may even be willing to pay extra for a seamless experience.”

Complexity remains around cross-border transactions

Many U.S. consumers who’ve adopted popular apps like Zelle and Venmo may be left wondering why similar solutions don’t exist for cross-border transactions. After all, despite the fact that there are over 4,500 commercial banks in the U.S., the back-end infrastructure supports real-time domestic transfers.

But things get hairy quickly when crossing borders and currencies. A myriad of varying regulatory and compliance requirements from sending and receiving regions contribute to often insurmountable challenges.

“Crossing borders and jurisdictions requires specialized expertise to ensure the secure and efficient movement of funds,” Riley said. According to a report by JP Morgan, the pandemic era saw a 600% increase in cybercrime, making money transfers a genuine risk.

Improve profit margins by implementing an embedded global payments solution

Despite the significant challenges, implementing a cross-border payment solution can yield material dividends.  In contrast to commoditized payment transactions, the intentional nature of the average cross-border transaction carries positive price sensitivity. It’s also worth noting that 75% of businesses surveyed in a recent Javelin study were dissatisfied with their current cross-border payment options.

By partnering with an experienced provider, financial institutions can side-step the complexity challenges and get a highly sought after cross-border solution in market quickly.

“Brightwell is unique because we have cross-border payments expertise built into our core. We saw the opportunity to build a platform that allows other organizations to integrate real-time payments with ReadyRemit,” said Ramakers.

ReadyRemit by Brightwell is a comprehensive remittance solution which simplifies implementing and managing a global payments program. Its full-scale, full-service, fully compliant remittance engine enables banks to enter or expand into the global payments industry — without the high costs associated with forming partnerships, building infrastructure, and navigating complex compliance and regulatory requirements.

The post How Banks Can Reclaim Their Leadership in Cross-Border Transactions appeared first on PaymentsJournal.

For companies conducting business internationally, keeping track of local payments ecosystems and regulations can be a headache. As a result, many businesses encounter challenges with their cross-border payments and are met with higher fees and lower approval rates.

What’s more, tackling this problem in-house can get expensive, especially for smaller companies looking to make their business more global.

Enter global payments orchestration. Third-party companies, such as BlueSnap, have developed tech solutions that manage and optimize payments across multiple channels, currencies, and geographies. This involves coordinating the flow of payment information and funds among merchants, payment service providers, banks, and other key stakeholders.

In a recent PaymentsJournal webinar, Ralph Dangelmaier, CEO of BlueSnap, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, discussed how global payments orchestration can pay dividends by streamlining the payments process.  

What is Payments Orchestration?

Payments orchestration is the ability to process payments, turn on and off payments services globally, and receive payments via multiple channels. This is enabled by a payment orchestration platform, which is  a centralized hub that connects to various payment gateways, acquirers, and processors. This hub allows a merchant to orchestrate all their payments from one place.  It can also help streamline the payment process by providing advanced features such as fraud detection, currency conversion, and reconciliation.

Overall, payment orchestration is an essential component of global e-commerce, enabling merchants to expand their reach and improve customer experiences while managing payment-related risks and costs.

“In an orchestra, a conductor needs to have all of the musicians in one spot,” Dangelmaier said. “The conductor can raise and lower the volume of different sections depending on the dynamics of the piece. So there should be one provider that can organize all global payments infrastructure and change which types are used based on the dynamics of the market.”

Although there are many payment orchestration platforms for domestic markets, few have a global focus.

According to Dangelmaier, successfully orchestrating payments globally requires two key elements. The first is the ability to process cards and non-cards bank transfers globally. The second—which can be considered the most important—is keeping the transaction local. One example is paying in a local currency on a local exchange.

“Paying locally increases your authorization rates and lowers cost,” Dangelmaier said. “The cost of processing a payment locally is anywhere from 1% to 2% lower.”

This can result in significant savings on a large transaction.

Additional challenges with expanding globally are regulation and compliance. “Each market has its own rules and requirements,” Keyes said. “Orchestration can help a merchant figure out what they need to be doing differently in Latin America versus Asia, for example.”

Payments orchestration carries additional benefits. It can help with taxes, fraud, and chargeback management. A company’s compliance team may not always be aware of local rules in every country, and a payments orchestration platform can help.

Many companies don’t know this, but cross-border payments often have low payment authorization rates, which can be a drag on business. Paying in local currency can also increase payments conversions.

“Localized payments authorization rates are usually 95% to 99%,” Dangelmaier said. “Cross-border transactions usually have authorization rates somewhere between 80% to 90%. So you can get anywhere from a 3% to 12% lift in your authorization rates by localizing transactions.”

The Cost Savings and Flexibility of Payments Orchestration

Companies can be tempted to rely on cross-border transactions and not have to figure out local payment markets. But, Dangelmaier notes, the costs of doing so can be severe.

“We get on the phone with platforms and merchants all the time, and we tell them: ‘Do you realize that a third of your cross-border transactions aren’t being authorized, and you’re paying 1% or 2% more on $30 million of business?’” he said. “So we walk them through an ROI and show how much money they can save by using local payment methods to ensure higher authorization rates and lower fees.”

And as the payments space continues to see a proliferation of payment methods, leaning on a payments orchestrator can simplify the workload for businesses.

“Whether it’s crypto or BNPL—or even payment methods that we haven’t heard of yet— consumers want to be able to pay [how they want] and businesses need to be able to quickly add them and integrate them into their system,” Keyes said. “Working on individual integrations with each new payment method can take a long time. And payment orchestration can help speed that process up and make it smoother and improve the experience for the consumer.”

Key Takeaway

Payment orchestration can increase return on investment, by optimizing the way the payment is processed, thereby minimizing fees, and maximizing authorization rates.

Additional benefits to payments orchestration include regulatory compliance, and the valuable data that’s collected.

“Payment orchestration feeds into your business analytics and can be processed by AI to yield key insights that can help executives make decisions,” Dangelmaier said.

Global payment orchestration is essential for businesses looking to expand into new markets, improve their customer experience, increase sales, manage risks, and save costs. It should be a priority in any business’ strategic growth plan.

The post Global Payments Orchestration Simplifies International Payments appeared first on PaymentsJournal.

In 2022, 40 million people lost a total of $43 billion in identity fraud and scams. Although certain types of fraud are rampant, that is not true of all forms. New-account fraud declined by 42%, and there were 2 million fewer U.S. victims of identity fraud scams in 2022 as compared with the year before.

During a recent Javelin Strategy & Research webinar, “2023 Identity Fraud Study: The Butterfly Effect,” John Buzzard, Javelin’s Lead Fraud and Security Analyst, joined with other leaders in fraud prevention to delve into systemic identity fraud in the United States. Rounding out the forum were Kathy Stokes, Director of Fraud Prevention Services at AARP; Ben Erdel, General Manager of Identity Theft Protection at Equifax; and Jeff Robbins, Director of Enterprise Fraud Controls at FIS. They unpacked Javelin’s extensive research into fraud and scams.

Identity Fraud: A Primer

Identity fraud is becoming more common and harder to prevent because criminals have more ways to access someone’s personal information. Because personal data can be bought and sold on the dark web, criminals are just a click away from getting access to people’s private details.  

“There’s a full profile of me that sits out there today where somebody can go and purchase it,” Robbins said. “More than likely, they can get my address some other key attributes, and perhaps even the last 20 passwords I had across multiple websites that were all hacked. And all those fraudsters are going to go to my other websites and see if I’m foolish enough to reuse passwords.”

Historically, it was mostly financial institutions that were targeted for fraud and had to be monitored. Now, social media accounts and unemployment claims are monitored to protect individuals’ identities.

“Identity fraud and identity scams have always been around,” Erdel said. “What has changed is the scale and the entry points to consumers. What we’ve seen in the identity theft protection spaces is it’s beyond just financial institutions.”

How Bad is Fraud?

Financial institutions and consumers must deal with different types of fraud. With identity fraud, for example, a victim’s information has been stolen. A scam, however, is different and involves criminal manipulation that has a financial impact.

In 2022, 15.4 million victims of identity fraud suffered $20 billion in losses. The number of victims was up less than 1% from the year before. Identity fraud scams affected 25 million people and resulted in $23 billion in losses. At this point, identity fraud scams have become an even bigger problem than traditional identity fraud, in terms of victim numbers. However, scam losses declined by 17% from 2021, so enhanced security is playing a role in reducing fraud.

“When we look at the victim counts for traditional identity fraud, there was barely a 1% increase in 2023,” Buzzard said. “When we move over, though, into the scam category, things are a little bit different. There, the number of people affected declined by 2 million. But it still leaves us with $43 billion total in financial impact and 40 million consumers out there that potentially have been victims.”

New-Account Fraud

One positive surprise in the identity fraud category is the decline in new-account fraud, which occurs when criminals use stolen information to open new accounts.

In 2022, there was a 42% decline in losses, to $3.2 billion.

“We reported (in 2022) a 109% year-over-year increase for new-account fraud,” Buzzard said. “It’s no wonder that everybody had their marching orders from their boss to focus on this, get the numbers down, do the best possible effort to see some declines. And we really delivered here in this particular way.”

Credit card accounts are still a favored choice to be targeted by criminals. Checking accounts and savings accounts? Not so much. All have been improved with better security protocols.

“With new-account fraud, practitioners have deployed things that during the pandemic they weren’t embracing before—identity-proofing and document verification,” Buzzard said. “It’s the combination of that selfie snap and the validation of the document before opening these accounts. A lot of that went out the window a couple of years ago with the pandemic and is now coming back.”

Account Takeover Fraud

Another key type of identity fraud is account takeover fraud, which amounted to $11 billion in losses. This type of fraud is a particularly pesky variety.

“If fraudsters can insert themselves into the validation process of the fraud alerts that banks and credit unions send out, it can be very devastating,” Robbins said.

A fraudster successfully impersonating a victim can change an email address and the phone number on file. Their processor might catch fraud happening in real time and put out alerts, but the criminal can intercede and say the authorization is legitimate.

Isolation can also contribute to people’s susceptibility to scams.

“If you do not have that trusted buddy companion relative, a sounding board, someone at the watercooler in the morning that you say, ‘I had the strangest thing happen to me. Last night, somebody called me on the phone and pretended to be Cathy,’ that kind of interaction is really meaningful,” Buzzard said.

“I can’t reach through this interface and get you to feel less isolated. But I think we could all agree that we can take the stigma out of being victimized. Part of feeling isolated, even emotionally, is when you’re just so darn ashamed that you were scammed.”

If scams were a function of aging and cognitive decline, fraud would mostly be committed against old people. But that is not the case.

“FTC data show that younger people experience fraud and fraud losses way more than older adults,” Stokes said. “But they contribute less to total fraud amounts, because when an older adult is the victim, they lose so much more.”

Key Takeaways

Fraud won’t go away any time soon, but businesses can take steps to help combat the issue.

Companies should mandate multifactor authorization—and lean on opt-in functionality. It improves security so much that it’s worth whatever annoyance it causes customers.

Developing a risk factor blueprint to curtail identity fraud is also crucial, as is further investment in a technology base, which should leverage data from public sources.

Finally, companies need to have better consumer outreach. What most identity scam victims don’t know, but should, is that scam victims tend to know their perpetrators. Better knowledge about security practices and how to avoid being a victim can put consumers in a stronger position to avoid becoming victims in the first place.

The post Javelin’s Identity Fraud Study Highlights the Changing Nature of Fraud appeared first on PaymentsJournal.

ACI Worldwide’s recent ACI Speedpay Pulse report reveals a significant transformation in consumer preference for mobile payment options across generations, from Baby Boomers to Gen Z.  But key generational differences still exist in the way people want to pay for things, which companies developing and marketing payments solutions need to consider.

In a recent webinar, Steve Mountz, Director, Product Marketing at ACI Worldwide, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, discuss how various generations prefer to pay. Spoiler alert: Gen Z gets stressed about paying bills, whereas Millennials are more likely to use multiple digital wallets.

Overall, ACI Worldwide’s findings emphasize that businesses must adapt and offer a variety of payment options to accommodate all consumers.

Converging Generational Trends

ACI Worldwide looked at bill payment habits across four generations: Boomers (born before 1965), Generation X (born from 1965 to 1980), Millennials (born from 1981 to 1996), and Gen Z (born from 1997 to 2012).

For the most part, respondents across all age groups prefer digital channels, but the key difference is whether they drift to the browser or the mobile app.

“Boomers lean way towards website payments, while Gen Z and millennials prefer mobile more than they do the web,” Mountz said.

What’s more, nearly equal percentages from all generations—essentially the majority of each—prefer to pay with their checking account, but they differ in how they like to access those funds. According to Mountz, “Boomers use ACH and checks, while Millennials and Gen Z almost exclusively use a debit card.”

Boomers: Most Likely to Pay Via Check and Credit Card

Boomers, more so than their younger cohorts, prefer to pay with a credit card. In fact, 27% of respondents in this age group said as much, whereas lower percentages of Gen Xers (24%), Millennials (22%), and Gen Zers (17%) agreed. 

The older group is also the least stressed about paying bills and the most likely to keep passwords on a piece of paper or in a notebook.

“Boomers have been doing this for a while. They’re not really stressed about the bill payment experience, but they are the most likely to write their bill payment passwords on paper,” Mountz said. “We found that actually 45% of Boomers are still writing their passwords on paper.

“They also only change their passwords when the biller makes them.”

“As a generation gets older, they become a little more set in their ways,” Keyes said. “It’s easy to write all your passwords on a piece of paper. It’s not the most secure option, but it’s easy. And this generation will likely keep operating the way they want to operate because that’s just how they’ve done it.”

Gen X: Most Likely to Forget to Pay on Time

Gen X has the greatest number of bills to pay and is the least likely to pay on time. That group also is the most likely to experience identity theft.

“Roughly 27% said they have been a victim of identity theft vs. about 25% of Millennials and only 14% of Gen Z,” Mountz said.

Gen X is also the most satisfied with the bill pay process compared with other age groups. “When we talk about the bill pay process, we’re talking about the speed, the security, the number of channels and methods they have available, as well as communication from their biller,” Mountz said.

Members of this group are also more likely to forget to pay their bills on time.

“When you have so many bills, it can be hard to keep track of all of them, especially as Gen X is not as digitally savvy as younger consumers,” Keyes said. “They might have a harder time simply keeping track of all their bills. If they don’t have a list somewhere or if they don’t have it all kind of compiled in a convenient place, it’s easier to just have a bill slip through the cracks.”

Millennials: Most Likely to Be Frustrated with Payment Processing Speed

Millennials have the greatest level of excitement for alternative payment methods and faster payments.

“Millennials came of age during PayPal and Venmo, and they want to pay their bills with them,” Mountz said. “In fact, 61% want to pay bills with an alternative payment method vs. about 27% of Boomers. However, they’re most frustrated with the payment processing speed or the lack of speed. We found that 40% of them are willing to pay some sort of fee to get faster processing of their bill payments.”

One surprise from the survey is that Millennials had the highest preference for digital statements compared with the other groups.

“Millennials came of age with all these digital options,” Keyes said. “They want everything they do to be fast—especially when you get a consumer-facing experience of Venmo or another app service where you send the payment to a friend and instantly the money out of your account goes into their account.

“Obviously, in the back end, there’s processing and it’s more complicated than that, but to consumers, it looks like they paid someone [instantly]. When you’ve seen that experience, you expect the fastest possible speeds, but that’s not always available—at least, not widely available.”

Gen Z: Most Likely to Be Stressed About Paying Bills

No generation is as stressed out about paying bills as Gen Z.

“When we asked consumers how they feel about the bill payment process, 31% of Gen Z found the bill payment experience stressful either always or most of the time,” Mountz said. “What’s more, 34% said they were nervous about whether or not they’re able to remember to pay their bills, and 49% said they get anxious. So, they’re generally stressed, anxious, and worried about whether they can cover their bills or pay them on time.

“We also see a high preference for in-person payments, which was kind of a surprise.”

According to Mountz, Gen Zers prefer to pay in person because they often have questions. “Maybe they’re making a huge tuition payment, and they have questions they want to ask before submitting it,” he said. “So they make those payments in person. We also see a lot of times that they want to pay in person at a third party like a Walmart or a Walgreens.”

Keyes added that the in-person preference may simply be because young people have more time on their hands and fewer responsibilities. “There are many Gen Zers who have children and are very busy, but many do not,” he said. “That gives them more time to go to a store for fun. Some may just go to a store because they have the time to do it—it’s more of an interesting experience.”

Generational Changes vs. Changes in the Life Stage

In surveys like the one from ACI Worldwide, it can be difficult to determine which generational differences are due to actual changes in outlook or habit and which relate to just being in a different life stage. For companies looking to forecast the demand for different kinds of bill pay products, distinguishing between these factors is essential.

As Keyes puts it, “This data overall really showcases that when you’re at different life stages, you take different steps to adapt. Most of these things are not so directly tied to habits of Millennials as a generation getting younger to older.”

For example, the ACI Worldwide study found that different generations made different lifestyle changes in response to inflation. But this doesn’t mean that the age groups actually think differently; they’re just in different life stages with different financial situations.

Yet, in some cases the generational changes are clear. This is most obvious in preferred payment methods. It is also the case in how close to a bill due date people pay their bills, with younger people paying their bills closer to the deadline.

“If you aren’t paying with a check and know you can pay close to instantly, then you’re more comfortable making an almost late payment because you know that if you make the payment a day or two before it’s going to be OK,” Keyes said. “And younger consumers seem to be more comfortable with that process.”

One new product that all age groups are interested in is “Request for Pay,” which ACI is working on launching with FedNow. “Almost everybody’s interested [in it] because it helps them avoid late payments,” Mountz said. “But for Millennials, it’s that payment confirmation. The funds will transfer immediately, and the confirmation of transfer will be instantaneous.”

The post How Consumers—from Boomers to Gen Z—Prefer to Pay Bills appeared first on PaymentsJournal.

Many businesses manage their cash flow and payments using spreadsheets and basic accounting software. But as they scale, that type of cash management is no longer viable. An investment in systems that can help visualize how much cash a business has—and how much it will have in the future—is necessary, particularly when it comes to handling accounts payable (AP) and accounts receivable (AR) information.

In a recent PaymentsJournal webinar, B.C. Krishna, Founder and CEO of Centime, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, discussed how small and medium-sized enterprises can better manage their cash flow by integrating accounts payable automation, accounts receivable automation, cash reporting, cash forecasting, and lines of credit.

Cash Is King but Difficult to Manage

Managing cash is crucial to the success of any business. “Businesses that do well by managing their cash, generally speaking, are highly valued and grow as well,” Krishna said. “Larger enterprises have the maturity, people, technology, and treasury management solutions to be able to gain insights into how their cash functions.”

But for smaller companies that are less mature, knowing how much cash is liquid at any point can be surprisingly difficult.

“As you move down market into the small and midsize businesses, the discipline and the rigor associated with cash management is sorely lacking,” Krishna said.

Most companies have a 13-week cash forecast, which represents one business quarter—and this forecast is crucial for planning. But in many small and midsized businesses, putting together a cash forecast is at best a manual, ad-hoc, error-prone process, Krishna noted. “And the logic of what happens is buried inside some Excel spreadsheet that only one person properly understands,” he said.

Having a visual representation, one that accounts for the timing of the inflows and outflows, allows a company to manage cash more easily day to day. Such a system also makes it crystal clear to everyone how it gives them the ability to manage their cash on an ongoing basis.

Partnering with Banks for Solutions

Centime’s goal is to integrate accounting practices that have traditionally been managed separately, corralling them to perform holistic cash management. “If you look in the industry today, you have AP products, AR products, cash-forecasting products, but nobody has really brought them together under the rubric of better managing cash and cash flow,” Krishna said.

For example, most AP solutions on the market target accounts payable specifically, without integrating that with a broader cash management perspective. The ability to manage cash outflows is good, but even better is being able to see, in graphic form, how those outflows will affect cash flow over the next quarter. That is the integration Centime provides. If a business can stretch days payable outstanding, it can increase working capital.

As a business owner tweaks the way accounting and payments are done, Centime’s software automatically updates the cache for forecasts based on those changes. “That provides a more current view into your forecast rather than waiting for the end of the week and having that person with a spreadsheet update it, and hope they didn’t make an error,” Krishna said. “It’s a real-time forecast.”

Managing Cash Well Leads to Savings

The cash flow gains of focusing on these accounting statistics can be significant.

“According to one study I read recently, something like 53% or 54% of invoices in the U.S. B2B marketplace are paid late,” Krishna said. “Another study showed that the typical midmarket company has something like $300,000 in late open receivables. These are not small numbers.”

With Centime’s software, the effects of such changes immediately appear in the diagrams showing cash flow, so it is easy to see the impact of various modifications.

Sometimes, businesses face a cash flow gap even with robust cash management. In such a scenario, simple access to credit is needed. Riley said the integration of banking products into a software package that puts cash management and forecasting front and center represents a renewed focus on small to medium-sized businesses.

“Banks are used to offering products that center around what they do,” he said. “What I see is the shift here is moving away from a bank-centric model and focusing more on the business owners themselves as it integrates with financial services.”

This reorientation is a new development driven by the fintech industry, and by Centime in particular. Centime integrates accounting automation and credit options offered by banks into one cohesive experience, which makes it easy to visualize how various choices can influence cash flow.

The post How Properly Managing Cash Flow Can Set Businesses Up to Thrive appeared first on PaymentsJournal.

The global adoption of digital payments is increasing, and commercial payments are no exception.

During a recent PaymentsJournal webinar, Dean Leavitt, Founder and CEO of Boost Payment Solutions, and Steve Murphy, Director of Commercial Payments at Javelin Strategy & Research, discussed how corporates can modernize and transform operations, particularly commercial enterprise payments. They also highlighted four important strategic factors: cost mitigation, working capital, flexibility in rules implementation, and risk management.

Targeting these factors will help businesses keep abreast of trends in IT and help them focus resources in the face of economic instability.

Mitigating Hidden Costs in Payments Processing

Chief financial officers focus on cost control, but some costs are more obvious than others. “CFOs don’t necessarily focus on the cost of the cost, meaning what does it cost to make or receive a payment,” Leavitt said.

“According to data we collected, it can require 11 hours to manage a single invoice. And up to 15 people can be involved in managing that same single invoice. Roughly 3% of a business’ revenues are spent on managing B2B payments. So while the focus is appropriately on the cost of business items, there needs to be much more of a focus on the actual cost of making or receiving payments.”

In the B2B payments space, companies can mitigate costs by choosing payment methods that minimize transaction fees and exchange rate charges. To help optimize the acceptance of various payment methods, Leavitt suggests a list of questions companies should consider:

• Do you currently offer an early pay discount?
• What are your current payment terms?
• When are you actually getting paid?
• What are your labor costs to receive and process payments?
• If you’re accepting commercial cards as a form of payment, are you optimizing the way you’re receiving these payments?

Commercial credit cards can be highly advantageous for corporates, but they often induce negative reactions in the suppliers they pay. Suppliers typically bear the cost when accepting credit cards, so they have traditionally preferred direct deposit or ACH. When businesses ask some of the questions above and initiate a conversation with a supplier, it’s possible to reach creative and cost-effective solutions.

“Suppliers may be able to actually trade in, let’s say, a 2% early pay discount for card acceptance, to get paid at the same early timeframe at leass than a 2% discount,” Leavitt said. “So questions are obviously critical when you’re trying to develop a solution.”

Paying a fee for commercial credit card acceptance may cost less than the staff necessary to process a payment manually. “In the past year, we did some research on receivables, and about 75% of respondents—financial professionals and receivables folks—actually provide receivables or utilize receivables financing,” Murphy said. “When you consider card acceptance versus 75% doing receivables financing, it’s important to make sure that they know what they’re paying for because the cost of capital is going up.”

There’s also a broad misconception among financial professionals about the actual cost of accepting commercial cards, Leavitt said. “Historically, the costs might have been significantly higher,” he said. “But as the card networks have begun to address the needs of enterprise-level businesses, the cost of acceptance has come down significantly.”

Virtual Cards Can Improve Working Capital

In the B2B payments space, efficient payment processes can positively affect a company’s working capital by reducing the time between payment and receipt of funds. Central to increasing working capital is the use of virtual commercial cards.

According to Murphy, the use of virtual cards grew over the past five years and will continue to grow for good reason. Virtual commercial cards present a win-win. They can improve cash flow for buyers by increasing days payable outstanding (DPO), which is the number of days it takes to pay a supplier, and they improve cash flow for suppliers by reducing days sales outstanding (DSO), the number of days it takes to receive payment.

For a further breakdown, it helps to compare a virtual card payment to an ACH.

“Let’s say an ACH payment is due in 45 days,” Leavitt said. “The ACH is initiated on day 43, and the payee receives the funds on day 45. So you have a DPO of 43 days, and you have that 45 Day DSO.

“What we do is introduce a card product into the mix, to extend the grace period. If we reduce the payment date down to day 20, this reduces the DSO for the supplier from 45 down to 21. Because if you initiate the card transaction on day 20, the actual funds will be good and in the supplier’s account on day 21. But that initiates a grace period.”

“Assuming an end-of-month, plus-25-day cycle, you can extend your DPO out an additional five days from 45 to 50 days. So in this particular case, introducing card into the mix reduces the supplier’s DSO by 25 days and expands the DSO by five days for a true win-win scenario.”

Crafting a Data Strategy

The commercial payments industry is in the process of initiating payments and moving data from analog to digital. Although the payments infrastructure gets much of the press, the overall management of data is just as important.

“The No. 1 challenge when managing non-payroll spending relates to data errors,” Leavitt said. “This is because these processes are often HR-intensive and therefore introduce the possibility for error. Roughly 50% of businesses cite that data management costs are a key barrier to their ability to innovate. That’s incredible. Half the businesses out there have recognized this fact, and nearly half have reported receiving unusable information or remittance data.”

According to Murphy, poor data quality is responsible for part of the exorbitant cost of cross-border payments. “Missing data or incorrect data gets exacerbated in cross-border, because of different sovereign formats and regulations,” he said. “So it just multiplies cost by a factor of 1.5.”

Similar to sniffing out hidden costs in processing payments, the first step to improving data quality in corporate payments is asking the right questions and setting up a plan. This could also involve using a “data map” to get the right data to the right people, instead of having an employee do it manually. This map is a set of rules protocols, which are followed automatically by an IT system in assigning the right data correctly. “Most companies don’t have available to them significant resources right now to put towards operational efforts to change data flow,” Leavitt said.

Each industry has its own data-related particulars in the way it does payments, and it requires customized solutions. “There’s often a disparity between what a supplier or a buyer has in their respective accounting or ERP systems,” Leavitt said. “The version of the account number, it could be truncated or it could be just completely inaccurate because it’s less mission-critical for them to have the exact account number in their system versus the version that’s actually sitting on the biller’s system.

“In those cases, we’ll provide an account translation bridge to make sure that whatever payment is passed to that biller is received in their full and complete version of that account number. If you’re going to be digitizing their payment processes, you have to accommodate for those idiosyncrasies.”

Rampant Fraud Can Be Mitigated by the Right Payment Methods

Managing risk will be a top priority in 2023, particularly in reducing fraud.  

“In 2021, nearly $2.5 billion was lost due to email-related compromises that resulted in a fraudulent payment,” Leavitt said. “And 75% of large corporations were victims of payment fraud and data hacks. Fraud is on the rise because the bad guys are getting better at what they do.”

Some kinds of payments are more susceptible to fraud than others, according to Leavitt. Checks, wire transfers, and ACH debits are considered high-risk, whereas virtual cards have the lowest level of fraud because their “straight-through” processing technology makes them inherently difficult to attack.

“With straight-through processing of virtual cards, neither the buyer nor the supplier receiving the payment have access to that card data,” Leavitt said. “It’s processed straight through without human intervention.” That’s what makes cards worth considering for CFOs focused on fraud reduction.

During the pandemic, companies were pushed to improve their digital operations, often partnering with fintechs like Boost. Fintechs can do not only things that corporates don’t have the resources for but also can develop new ideas and present possibilities to companies that financial institutions haven’t considered.

“A lot of what we do on a regular basis is educational,” Leavitt said. “It’s introducing enterprise-level buyers and suppliers to the tools that are available to them to expand working capital on both sides of the equation to reduce fraud and other types of risks associated with payments to introduce operational automation in ways that they didn’t previously envision, thereby reducing or allowing them to redeploy personnel in other more productive areas.

“The world has changed dramatically on so many different levels over the last couple of years. But as it relates to B2B payments, it’s an incredibly exciting time for both buyers and suppliers and those of us that serve them in the community of fintechs.”

The post Optimizing Commercial Payments in the Digital Age appeared first on PaymentsJournal.

Despite the fanfare around the launch of FedNow this year, many businesses are skeptical that real-time payments (RTP) can be monetized and are adopting a wait-and-see approach. Although it is true that RTP technology has not come into full force and use cases have not been completely fleshed out, banks and fintechs need to have a strategy so they are not left behind as RTP becomes the standard over the next few years.

During a recent PaymentsJournal webinar, Chris Nichols, Director of Capital Markets at SouthState Bank; Reed Luhtanen, Executive Director at U.S. Faster Payments Council; Carrie Blankenship, Payments Innovation Principal at Volante, and Steve Murphy, Director of Commercial Payments at Javelin Strategy and Research, shed light on the various RTP business cases and gave an overview of how the space is set to change.

Strategy for RTP and FedNow

With real-time payments—or faster payments as they’re referred to in some countries—adoption has varied. According to Luhtanen, it’s important to take a step back and look at the contrasts of adoption to get a full picture. “In many countries where you hear about advancements and being ahead of the U.S. when it comes to faster payments, there were government mandates put in place that caused those advancements to happen,” he said. “There’s essentially a monopoly service that’s pushing that forward in those countries.”

“The U.S. hasn’t gone that way,” he added. “We’ve got a market-based approach with a number of different flavors of fast, if you will.”

There are certainly several considerations in developing an RTP strategy, and for many, those considerations convene at figuring out if they should be looking at RTP or FedNow—or thinking about both. “It’s about getting an understanding of what are your customers looking for,” Luthanen said. “What are the demands in the marketplace that you’re trying to solve for, and what are the use cases that are going to move the needle?”

“Part of that knowing is building out that strategy and getting informed and involved in different forums. What are other folks in my peer set doing? What are their customers telling them?”

According to Nichols, FedNow is likely to have more acceptance throughout the financial space, but that doesn’t mean The Clearing House network should be counted out. “Over time, we think The Clearing House is going to compete with FedNow on pricing,” he said. “We want to be able to take advantage of that when the time comes.”

In the current ACH space, if you have one ACH network or one ACH provider, you have access to all of them. But as Blankenship points out, in the instant payments space in the United States, that’s simply not the case yet. “It comes down to an issue of I can send a payment to Chris, but I can’t send one to Reed,” Blankenship said. “Whether there are commercial small businesses or retail customers, they’re not going to understand the difference. In the foreseeable future, the importance of leveraging both RTP and FedNow really cannot be underestimated simply for the fact that there’s that lack of interoperability between the two that wouldn’t be understood by your customer base.”

“Once they’re interoperable, you can declare for one or the other, but in the short run, it’s certainly a really important consideration to think through, the idea of leveraging both,” she said.

FedNow and the RTP network will differ in some nuanced ways when it comes to settlement accounts, risk tolerance, and technical implementation. “In order to send a real-time payment, you need a settlement account. With FedNow, that’s a direct federal reserve account,” Murphy said. “With TCH, it’s a joint account that’s managed on a continuous settlement basis.”

Transactions may post at slightly different times between the two and differ in risk tolerance. “RTP currently has a $1 million single transaction limit. FedNow is going to start with $500,000,” Murphy said. “The banks can set their own ceilings below those limits, depending on their risk tolerance, and we’re expecting these overall transaction limits to increase over time.” The systems are also both based on ISO 20022 messaging standard, which institutes a common platform for the development of messages in financial services.

Monetizing RTP

In the United States, real-time payments have been around for roughly five years. Although payments are generally commoditized, there’s an opportunity—specifically for banks—to monetize RTP and provide more value-added services.

“I believe you’ll see the industry move more to a subscription-based model where you subscribe for a year for a bulk of transactions and go from there,” Nichols said. “But that’s not where we believe the fight is. We believe the fight is over the ability to create new and innovative products, like using the components of RTP and FedNow and combining it with certain integrations such as fraud, identity escrow, and just a number of other products we believe will be higher-margin products that banks and fintechs can charge for.”

Luhtanen noted a large financial institution he spoke to that’s winning more auto loans because it is funding using RTP and the dealer wants to ensure that the payments are coming through right away. “Things like that can be key differentiators and make your service more attractive,” he said.

The Business Case for RTP

For FIs, there are typically many competing priorities, and it can be difficult to keep a focus on the right ones. One of the best pieces of advice, Blankenship said, is to know your enterprise goals. “Faster payments can facilitate or enable those goals that are already in place,” she said.

“Think about loan growth” she added. “What happens if you can fund a loan two to three days faster on an individual loan? Three days of interest may not be significant, but you can make thousands of those loans and you fund them two to three days faster.”

The stronger case is that real-time payments will be standard in the future, and companies that don’t get on board will fall behind.

“Studies that I’ve seen in the last year have indicated that a vast majority of companies are either ready to use or utilize the capabilities in these instant payment systems within a couple of years,” Murphy said. “It’s a competitive necessity, but more like an opportunity cost if you don’t do something about it now.”

Getting on Board With RTP

Companies can set up their own RTP payment hubs or they can partner with a fintech company like Volante that will help them through the process. This will be especially important for smaller banks that don’t have the resources or the inclination to handle RTP technology in-house.

Regardless, companies should understand that the IT aspect is only part of the battle.

“RTP launched in late 2017 and a colleague of mine, we did some interviews a year later with some of the early adopting banks, including Citi and JPMorgan Chase,” Murphy said. “And the interesting thing is that they said it was roughly a five out of 10 in terms of IT complexity, but a bit more complex when it came to operational synergy.

“That’s what banks have to keep in mind, having operations in place. In a separate conversation with TCH, they indicated that they’re ready at around 300 bank connections, and more than 80% of those are smaller banks. So it’s pretty obvious that the smaller institutions need that type of resource.”

Regardless of how banks prepare, they need to get ready now for real-time payments. “A bank that waits is not going to be able to handle some of these new products that are coming down the line, are not going to be able to change their operations quickly enough,” Nichols said.

Murphy notes that real-time payments are already starting to be a differentiating factor.

“Small businesses are already seeing some merchant services providers that are offering same-day instant cashouts,” he said. “Some of those businesses may need that liquidity on a Saturday to be able to go to market and get their next set of supplies to be ready for Monday morning. These are the things that are already out there. Just like movies on demand, just like purchasing on-demand Instacart in an hour, those expectations are already set.”

The post Financial Institutions Without an RTP Strategy Risk Being Left Behind appeared first on PaymentsJournal.

As the U.S. moves toward broad adoption of real-time payments (RTP) later this year with the deployment of FedNow, it can learn a lot from the UK’s implementation of real-time payments.

A recent webinar featuring Miriam Sheril, Head of Product at Form3’s U.S. division, Connie Blacklock, EMEA Head of Real Time Payments at J.P. Morgan, and Steve Murphy, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, shed light on what banks should consider when it comes to real-time payments, the vast differences on what the space looks like in the U.S. compared with other regions, and what the payments industry can expect in 2023.  

Differences Between U.S. and U.K. Payments Ecosystems

The U.S. and U.K have some important differences between their financial systems, which U.S. banks need to keep in mind. In the U.K.’s faster payments system, for example, payments appear to move in real time, but settlement between banks actually happens only a few times per day. That’s different than the U.S., where on real -time payment networks, settlement happens immediately.

The U.K is also looser about who it allows to tap into its real-time payments system, allowing using bank intermediaries to access the network. “In the UK, you can be a financial institution that doesn’t have a banking license, but you can actually still participate in the scheme,” Sheril explained. In contrast, “The US has some pretty strict rules confirming that there are no intermediaries allowed. If you’re a bank, you need to directly participate in RTP or FedNow.”  

Allowing non-banks access to the real-time network can lead to innovation. “It really opened up the market for UK Faster Payments when the Bank of England changed the [participation] rules in 2017,” Blacklock said. “It really helped open doors in the market.” It is unknown whether this may happen in the future in the U.S.

Move to Real-Time Payments Involves Resilience and Availability

As banks start planning for the rollout of real-time payments in the U.S., they should not focus solely on the technical aspects. According to Blacklock, banks should focus not just on getting the payments right but also on transaction reporting and operational considerations.

“It’s easy to think about reporting as an afterthought because you’re so focused on the payment processing, but reporting is what gets you your data,” said Blacklock. “And it’s what clients need to make their businesses run. Definitely put reporting as a top agenda in terms of your planning.”

Another key focus should be on resiliency and stability. Because real-time payments occur instantaneously, a blip in the system can wreak havoc. With a real-time payments system, the lack of time lag reduces the room for error. In a few seconds, millions of transactions can drop or fail, and it is impossible to manually replay all the transactions. Thus, whatever can be automated in error recovery should be.  

It’s also important that U.S. banks align their teams for this upcoming transition to real-time payments. This includes making sure that everyone involved is familiar with how real-time payments work, what the cloud is, and how application programming interfaces (APIs) work.

Banks will need to focus on staffing for a 24/7 payments ecosystem and look ahead for any particular challenges that may arise. Sheril listed some specific concerns she heard from banking executives, including:

• “My operations team don’t work 24/7, how will we adjust?”
• “With reconcilement, how will those reports work? Because now I have a 24/7, no-end-of-day process, and what does that even look like?”

Murphy agreed that the people aspect of implementing real-time payments will be more significant than the technological aspect. “A while back, we interviewed about six or seven of the largest banks who had implemented RTP in some way, shape, or form,” he said. “And what they said was that the operational piece was much more challenging. The technology piece was a challenge, but on a scale of one to ten, it was probably more like a five or six.”

Blacklock also underscored the importance of planning for exponential growth in RTP. “Don’t be naive and think that your volumes are going to stay low, because again, fingers crossed for everyone who is choosing to go into RTP, you’re going to see high volumes and you’ve got to have your systems ready to do that,” she said.

RTP and Fraud

In many ways, fraudsters are benefiting from real-time payments, as they leave no time for customers or banks to second-guess them. The only way to solve for this will be via machine learning solutions, which will be developed as the RTP rollout proceeds.

“I was recently at an industry event, and what I heard was that, at least on the B2B [business-to-business] side, there really hasn’t been a large uptick in fraud yet,” said Murphy. “But fraud in general is bubbling and increasing. TCH [The Clearing House] does not provide layered services [addressing fraud] to the banks. They just provide the network and they are expecting the banks to develop their own systems of behavioral modifications and algorithms over time. FedNow is probably expecting to provide a couple of fundamental layered services for the banks. But mostly the reliance is going to be upon the banks themselves to build up their antifraud capabilities.”

What to Expect in 2023

Of the thousands of banks in the U.S., only a few hundred are currently on the TCH RTP network. More banks are expected to hop on the RTP bandwagon with the launch of FedNow. This will take time, though. “I don’t think 2023 is the year of huge volumes of faster payments in the U.S.,” said Sheril. “2023 to me is more banks signing up, starting their work, planning their budgets to get there. As more banks get on board there will be more use cases, driving a virtuous cycle of improvement.”

In contrast to the United States, the adoption of real-time payments is set to increase dramatically in the UK and the EU. “Last year, the volumes of real-time payments in the market increased 23% from 2020 to 2021 [in the UK],” Blacklock said. Furthermore, the UK is designing a new real-time payments architecture scheme, with a new platform and clearing system using the ISO 20022 messaging standard.

According to Murphy, next year will also feature innovation that has been a long time coming: cross-border real-time payments. “There is an initiative underway between TCH, EBA CLEARING, and SWIFT called IXB,” said Murphy. “They’re expecting to commercialize cross-border payments in 2023. And I would guess the first use case will involve Euro-US dollar conversions. But I would imagine that the UK is going to be one of the next markets that they’ll add next.”

In the United States, banks should get started now by planning their technology and human resources for the deployment of real-time payments. This involves gearing up for a 24/7 payments ecosystem, involving changes in staffing, reporting, and training. It will also involve getting everyone on board about the tech involved, including the RTP network itself, as well as cloud storage and APIs. Banks should also prepare for cross-border real-time payments, which will likely be operational next year. Those will connect with a real-time payments network in Europe and likely with a newly overhauled system in the UK.

The post Helpful Lessons for Real-Time Payments Implementation appeared first on PaymentsJournal.

Cyber Fraud Trends Spur New Mitigation Tactics

Account takeover, or ATO, is a form of identity theft where a third party gains access to an online account using stolen usernames and passwords. New account fraud occurs when a fraudster uses a stolen identity or a synthetic identity in order to open a new account, ask for a loan/credit or use the new account to transfer illegitimate funds. As fraudsters become increasingly sophisticated in their fraud attacks, the surge of both account takeovers and new account fraud has reached alarming levels. Outseer, a digital payments and account monitoring fraud prevention vendor, recently published its latest “Fraud & Payments Report,” which uncovered insights about digital fraud transaction trends for the first half of 2022.

For more than five years, Outseer has acquired considerable data for its quarterly published “Fraud & Payments Report,” leading to valuable insights for the industry. These insights include critical fraud trends, the rise of APP (authorized push payment) fraud, and effective tactics to combat fraud.

Critical Fraud Trends Found

On the e-commerce side, as much as 70% of card-not-present fraud comes from a trusted account using a new device, which suggests an account takeover. What this means is that either the card or the customer’s credentials were stolen. With these stolen credentials, fraudsters can carry out fraudulent transactions.

According to Dima Alkin, Head of Solution Consulting in the Americas at Outseer, adoption of EMV®3DS — as an effective means to mitigate card-not-present (CNP) fraud has increased. “3DS is a business enabler,” Alkin said. “In card-not-present transactions, it’s about trying to keep authorization rates as high as possible and lowering the friction.” Alkin also explained that card issuers, merchants, and consumers alike are benefiting from the use of EMV® 3DS. According to the report, the number of merchants using EMV® 3DS globally has grown by 277%.

According to the report, 2.3 million merchants around the world were using EMV® 3DS by the end of June 2022. Despite the absence of regulation, the study showed that 3DS adoption in the U.S. has grown by 415%. The numbers across the world indicate that more organizations are seeing how effective and efficient EMV® 3DS is to mitigate CNP fraud.

The great asset to EMV® 3DS is that it increases authorization rates of CNP transactions, thereby minimizing friction and maximizing business. This will contribute to happier customers, less fraud, and greater business growth.

Another channel where fraudsters are increasing their attacks is via mobile devices. As more consumers conduct their daily shopping and personal business activities on their mobile devices, this is opening yet another avenue for fraudsters to focus their attacks.

On another note, something many in the industry might not know is that fraudsters are not operating out of a garage. They consider themselves running a business where their focus is on generating the greatest return on investment, which is why they choose the path of least resistance — brand abuse, or the impersonation of an existing brand.

“What they [fraudsters] have discovered is that it is much easier to impersonate an existing brand,” added Alkin. “It can be anything that attracts consumer attention, where the consumer is then asked to provide their credentials, at which point the credentials are stolen. It is much easier to impersonate a major brand website as opposed to creating malware which involves coding and a certain skill set.”

Clearly, fraudsters are more likely to follow the path of least resistance and the results speak for themselves. Overall, Outseer FraudAction™ detected roughly 87,000 attacks during the 1H of 2022. Of those attacks, brand abuse was the dominant attack in the first half of 2022, with as much as 65% of the attacks detected by Outseer FraudAction™ service attributed to the Brand abuse category.

Since Q3 of 2021, brand abuse is increasingly the attack of choice for fraudsters. It has been the vehicle in which fraudsters have stolen customer data and, eventually, money. Conversely, the number of attacks via rogue apps has dropped during the same quarters, as that method requires more time and effort to keep up with.

“On the Javelin side, we’ve seen a jump in phishing attacks, just from a business and employee perspective, especially with so many people working from home,” said Suzanne Sando, Senior Analyst for Fraud and Security at Javelin. “It’s frustrating to see how wide of a net these fraudsters can cast to successfully exploit consumers. It’s a problem that organizations need to take seriously.”

There is no better way for consumers to interact with their preferred businesses than via mobile, as evidenced in this article. As Sando rightfully pointed out, more consumers are using their mobile devices to send friends money using peer-to-peer (P2P) platforms and for their mobile banking, and consumers want to be able to do so wherever they are. This trend is only going to increase. The downside to this trend is that fraudsters will be taking advantage of this opportunity.

The Rise of APP Fraud

Online banking payment fraud is another trend the report identified. Based on the report, roughly 75% of online banking payment fraud happens on a trusted account and trusted device. This points to APP fraud, where a customer essentially authorizes an illegitimate transaction after being manipulated or social engineered by fraudsters. However, current fraud monitoring tools detect the transaction as legitimate as the transaction attributes match a genuine user transaction. Based on these findings, organizations should home in on this trend as it continues to grow and threatens the security of their customers.

Alkin noted that Outseer has received an increase of concern from its clients regarding APP fraud.

“When it comes to fraudulent transactions, we see that over 75% of the fraud volume happened with [a] known and trusted account and device, which means nothing was stolen,” said Alkin. “It means the customer was talked into performing that fraudulent transaction. And that’s what makes it so challenging in terms of prevention, mitigation, and investigation. The customer genuinely believes that he has performed a genuine transaction.”

Fraudsters have become so savvy in their fraudulent attacks that they seem to have abandoned the practice of stealing customer credentials in order to make fraudulent transactions. Instead, they have found a way to persuade customers to transfer money to fraudsters in disguise of legitimate cause. This can be in the form of bogus account alerts, utility bills that must be paid, real estate wire fraud, and P2P fraud, just to name a few. What makes mitigation of this fraud difficult is that consumers are duped into making payments that seems legitimate yet money is transferred to mule accounts and fraudsters.

Once again, new regulations and technology are not the end-all to stop fraud. The consumer must be educated as an effective preventative measure against fraud.

“When it comes to scam and fraud loss liability, you have to stop it from the get-go,” Sando said. “At Javelin we’re looking at that education for comprehensive fraud scam and cybersecurity for consumers, empowering the customer with this kind of information and these education materials whether it’s coming from their financial institution or a merchant. It’s not just benefiting the customer, it’s benefiting the business as well.”

Best of all, a business that takes the time to educate its customers will increase its customers’ sense of trust in the business by conveying that the business has their safety in mind.

The reality is that fraudsters and their elaborate scams are not going away soon, so the best strategy is for businesses to arm their customers with as much information as possible to protect themselves. This way, everyone wins.

Alkin pointed out the importance of organizations taking ownership to mitigate fraud and not relying on external regulating bodies to step in. “We don’t have to wait for a regulation to tell us what to do. We can ask ourselves, ‘If I was the regulator, what would I ask myself to do and start putting those controls in place without waiting for anyone, making it our problem?’”

What Can Be Done About Fraud?

When it comes to eradicating fraud, there is no magic wand regardless of what many in the industry might claim. What will work with APP fraud is more of a holistic approach. Anomalies and deviations in behavior and device use must be identified during the customer journey.

For example, it would be more effective during the authentication process to ask the customer questions that are more specific than “Is this you?” Instead, confirm whether the customer agrees to send the specified amount to an account they have never sent funds to before. Research has shown that this usually results in a higher response rate.

It’s about being selective where you will challenge the customer, without causing challenge fatigue.

Using behavioral analytics is also effective, in some cases of APP Fraud, as it can detect anomalies in customers’ behavior. However, in other APP fraud cases it might not be as effective because there is no change in behavior — customers are simply following what they believe is a legitimate transaction.

Businesses must keep abreast of current fraud trends in order to develop an effective course of action to mitigate fraud. They should consider participating in consortiums that operate in different industries and geographies to get a better feel for what is happening in the fraud world. By educating themselves on fraudulent trends, businesses can be better informed and equipped, and have the tools necessary to protect themselves and their customers.

The fact that fraudsters tend to attack larger institutions does not mean that fraudsters will leave smaller players alone. No FI, be it a large bank or a regional credit union, will be safe. That’s why these aggregated data are important, so all organizations, big and small, will be armed with the necessary information to protect themselves and their customers.

Alkin also mentioned investing in tools to protect a business’s brand. Businesses should be ready to take down fake websites before they do massive damage to their customers.

Sando reiterated how the customer can be in the front lines of stopping fraud before it starts. “Just stop and think,” said Sando, “You don’t have to immediately react. If you are an FI telling your customers, ‘If you are unsure about something that someone is asking you to do, if they’re posing as an employee of this financial institution, stop, hang up, call us back. Just make the smart decision to just stop and analyze what’s happening.’”

The post The Cyber Fraud Landscape – A Glimpse Into Fraud Trends and How to Mitigate Them appeared first on PaymentsJournal.

The old saying goes: You don’t get a second chance to make a first impression. For digital businesses, that first impression is the digital onboarding process. It must be a smooth and easy process for the customer, while at the same time ensuring the proper protocols for regulatory compliance and to prevent fraud are in place.

However, onboarding new customers seamlessly in a digital environment without adding risk is a challenge for many organizations, especially those with unique regulatory requirements and different tolerances for risk. As the competition for customers (and dollars) tightens, customer abandonment and conversion rates will become increasingly important metrics, as will the impact of fraud on the bottom line.

To learn more on this important topic, PaymentsJournal recently hosted a webinar featuring Gareth Walker, Global Head of Client and Digital Onboarding at Refinitiv, and Brian Riley, Director of Mercator Advisory Group’s Credit Advisory Service.

The Importance of First Impressions

Historically, a customer’s first impression of a business came through a face-to-face interaction with a sales representative, or perhaps a phone call with a customer service rep.

“Now it is digital,” said Walker. “And it’s about how many clicks you have to make, how long the website takes to load, and how much information you have to give out.”

It’s not surprising then that businesses in all industries are spending heavily on the digital customer experience. Walker noted that global spending on digital transformation initiatives is expected to reach $1.8 trillion by the end of 2022, and around $300 billion of that is earmarked for digital customer experience improvements.

“A better customer experience brings really rich rewards,” said Walker, adding that in the financial services industry, for example, satisfied customers are seven times more likely to increase their deposits and twice as likely to open a new account with an institution if they consider themselves a satisfied customer.

Yet despite the investment made in digital customer experience (CX) and onboarding, it’s an area that businesses often fail at. Walker said that 66% of consumers abandoned a digital application without completing it in 2021, up from 63% in 2020. This abandonment is largely due to poor digital user interfaces (UI).

This is especially true for Millennial and Gen Z customers, who are much less likely to put up with onerous digital processes than older consumers, said Riley.

“Think of where you want to grow your portfolio,” Riley continued. “Your long-term customers are going to be in those younger-age cohorts for obvious reasons.”

Simplicity Is Key

The top three reasons for digital abandonment are the consumer changed their mind, the consumer was asked to input too much information, or the process took too long.

While not much can be done if a potential customer changes their mind on buying a new product or service, the latter two reasons can be fixed with a better digital onboarding experience, according to Walker.

For example, “If an onboarding experience lasts longer than two-and-a-half minutes, there’s a high risk of abandonment,” he said. “They move on to the many other distractions available on their device.”

Having to input too much information can be resolved by using data that the company already has on that consumer, added Riley. He cited an example of getting a preapproved credit card offer but then having to still input basic personal information in a digital form.

“If they already prescreened me, why do I have to put in my name and address again?” he asked.

Overall, a poor onboarding experience can have an outsized negative impact for businesses, with Walker noting that 52% of consumers report they are less inclined to use a company’s services in the future if the onboarding process is too onerous.

A Delicate Balancing Act

One dynamic that makes it hard for businesses to get digital onboarding right is competing internal dynamics. Sales and marketing, for example, want as quick and easy a process as possible, while regulatory, compliance, and security teams may want more robust protocols.

This is especially important because digital application fraud is on the rise. About one in six U.S. consumers have been affected by application fraud in the past year, Walker noted.

Application fraud can be committed in various ways. Sometimes criminals buy username and password combinations that have been leaked after data breaches. Criminals can also piece together enough personally identifiable information (PII) from consumers through tactics such as monitoring social media accounts to create “synthetic identities” that look like they could be real people. Sometimes victims have had their credentials stolen by a family member or people they know.

Application fraud affects virtually every industry, said Walker.

“When talking about application fraud, you have to be cognizant of how fraud is committed specifically in your industry and what the regulatory landscape is,” he added.

As seen in the following graph, bank checking accounts, credit cards, and mobile phone accounts are the top areas where fraudsters commit application fraud.

Digital Onboarding by Refinitiv Giact

How then can businesses balance a smooth and easy digital onboarding process with having the proper fraud protocols in place? Giact, a Refinitiv company, aimed to solve this conundrum with its digital onboarding solution, said Walker.

“It’s a digital onboarding solution that is fully configurable and guides customers through a user-friendly onboarding process while also conducting real-time verification checks that are integrated with your in-house systems,” explained Walker.

He added that the solution is fully customizable and dynamic so that businesses can ensure they “are delivering the right CX to the right customer.”

For example, if certain information about a customer is already known, such as name and address, those questions can be bypassed so as not to add undue friction to the process. Furthermore, a picture of a driver’s license or passport can be taken, and information can then be extracted from there to auto-populate certain fields.

The solution has three main components: a front end that the customer sees and can be completely white-labeled and customized to show the business’ branding. There is also an orchestration layer, which Walker called “the brains of the operation,” that captures data and sends them to Giact’s application programming interface (API) hub, where know your customer (KYC), anti-money laundering (AML), and other antifraud checks are carried out in real time. Finally, the data and results are passed through a customer relationship management (CRM) system for exception management and audit purposes.

Ultimately, the solution enables “different onboarding processes with different controls depending on your industry,” Walker said.

The post Solving the Digital Onboarding Challenge​ – Increasing Conversions without Increasing Risk appeared first on PaymentsJournal.

Identity Detection of the Future: Behavioral Biometrics, Tokenization, and FIDO for Fraud Prevention

When companies use identity data effectively, they deliver a highly personalized, frictionless journey that offers the right products to the right customers at the right time. They’re also able to optimize fraud prevention while minimizing any irritation for customers. 

During a webinar, Adam Gunther, Senior Vice President and Senior Technology Officer at Kount, and Tim Sloane, Vice President of Payments Innovation at Mercator Advisory Group, discussed how identity data can be used to smooth the payments process and drive business. They also discussed new trends, including biometric data and tokenization.

Digital Identity and Fraud Prevention

Fraud is often an afterthought, according to Gunther and Sloane.

“We have a saying in our team, that 5% of CEOs have a fraud problem, and 100% of CEOs have a revenue problem,” Gunther said. “Nobody sits around the boardroom focused on how to reduce fraud.”

“Most merchants that handle onboarding of new customers are not thinking ahead of where the ball is going to land,” Sloane noted. “They’re thinking, ‘I just need to open the account and protect the account. And everything will be great. I’ll get to know that accountholder better and better over time, and will use customer data for marketing purposes, for advertising purposes, for engaging, and selecting the right products to show to that customer,’” Sloane said.

Understanding who customers are as soon as they come in and open an account is critical. “The benefit of using identity is that you can start analyzing it sooner,” Sloane said. “Not only to drive revenue but also to start to think about where fraud is creeping in and how to manage that right up front.”

Knowing more about their consumers also allows companies to improve their interactions with them and, as a result, increase customer lifetime value.

By using an inventory of customer data, companies such as Kount can verify customer identities by matching device use information to personal information from Equifax. Kount uses device data that includes order history, IP addresses, email behavior, and other signals. Then, it matches this with Equifax customer data, such as name, address, phone number, employment, payroll, credit history, income, and wealth. The idea is to match a digital identity to a physical identity that has already been confirmed by Equifax.

Gunther described Kount’s identity solutions as a new way of connecting previously separate business wings—marketing and fraud detection. “Bringing in data such as household incomes and different wealth propensity to spend, we get semiannual anonymized data feeds across a number of sources,” he said. “Connecting that data back to the point of purchase, we can help better onboard users and improve how businesses interact with consumers in a variety of ways. We’re injecting identity data across every area of the customer lifecycle.”

Many marketing and fraud detection teams within companies are currently working in silos. And that lack of communication isn’t beneficial to the company. “When you take a look at companies that have full-blown digital marketing teams, it’s amazing how often they’re not connected to the payments or fraud prevention managers that are executing the processes that could help that marketing team—if they only took a look at what they’re doing,” Sloane said. “But quite often, it goes through the silos, and those silos don’t come together.”

The Ever-Changing Landscape

The payments industry is moving toward passive authentication by examining how consumers behave with their devices. “We know how tight you hold the device,” Gunther said. “Corroborated with other data, and signals, we have a high level of confidence in confirming the identity of the customer.”  

The way people hold their devices, the speed at which they type, and the way they type are not easily faked, and such attributes can act as “automatic” identifying information. “We expect that behavioral biometrics will have a huge impact on that whole process of identifying the customer from the time they hit your website,” Sloane said. “Biometrics will make it much more difficult to commit fraud and will open new opportunities for marketing.”

Kount is working on combining modern cryptography and data through its new tool, Digital Identity as a Service. In this model, a company confirms a person’s identity once, through traditional means or biometrics, then creates an encryption token on the customer’s device. When a customer uses the device to pay, that token acts as proof of possession of the device.

This approach is part of a broader move away from using passwords to verify identity.

Most people have different accounts online, with various passwords and authentication processes. As a result, customers face problems creating and remembering multiple usernames and passwords. In response to this problem, a group of companies launched the FIDO (“Fast IDentity Online”) Alliance in 2013 as an industry association to help reduce the world’s over-reliance on passwords. The idea is to use voice, fingerprint scanning, facial recognition, or a security key for standardized, password-less identification.

According to Sloane, FIDO is a huge step forward in customer experience and in streamlining identity detection for merchants. Kount is actively involved in the FIDO Alliance and combines FIDO procedures and cryptography to achieve its identity solutions.

By and large, payments companies need to take a more holistic view of identity data, by using more innovative types of information and by taking down the silos that hold data. Wise executives will see that personalized, frictionless shopping experiences are the future of the payments space.

The post Go Beyond Fraud Prevention with Identity appeared first on PaymentsJournal.

Sometimes customers engage in legitimate transactions but then later ask for their money back from credit card issuers. The industry term for this is chargeback. Chargebacks  have a significant impact on the bottom line for financial institutions. According to Aite-Novarica group, there will be roughly 252 million chargebacks this year worldwide. Understanding the reasons behind chargebacks can help financial institutions keep them to a minimum.

In a survey, Aite-Novarica group polled 12 financial institutions and 300 merchants in the U.S. and UK about their experience with chargebacks. This research found that chargebacks typically fall into two categories: first-party fraud and transaction confusion.

In a recent webinar, the findings were discussed by Sandy Condellire, Senior Vice President of Security and Decision Product at Mastercard, Ranjita Iyer, Senior Vice President of Security Solutions and Processing at Mastercard, and David Mattei, Strategic Advisor at Aite-Novarica. They provided insight into what percentages of chargebacks are due to first-party fraud and to transaction confusion, discussed industry trends in fraud, and spoke about potential solutions to help minimize chargebacks.

Common Patterns in Chargebacks

The two primary causes of chargebacks are first-party fraud and transaction confusion — and they differ in important ways. “First-party fraud involves purposeful misuse of the charge-back system,” said Mattei. “Whereas in transaction confusion, a cardholder doesn’t recognize a charge on his or her statement.”

First-party fraud can happen for a variety of reasons. “Often, it’s to purposefully game the system. Sometimes it’s buyer’s remorse. But either way, cardholders are using chargebacks as a tool to get their money back for an otherwise legitimate purchase,” said Iyer.

In contrast, transaction confusion involves an honest mistake. “In the cardholder’s mind, they really do think the purchase was not theirs,” said Condellire. “Oftentimes, confusion comes from bill transactions which are unclearly labeled by financial institutions and interpreted as fraud.”

Findings From the Survey

In Ethoca’s research, respondents were asked what percentage of their chargebacks were due to first-party fraud and what percentage were due to transaction confusion. “Financial institutions were estimating 10% of their chargeback volume was due to first-party fraud,” said Mattei. “When we look at merchants though, that number grows. U.S. merchants estimate 23% of their charge-back volume is due to first-party fraud. For U.K. merchants, this estimate is even higher at 40%.”

When looking at transaction confusion, estimations look different. Financial institutions estimate transaction confusion causes 10%–39% of chargebacks, while U.S. merchants estimate it leads to 58% of their chargebacks.

Overall, first-party fraud is not the reason for most chargebacks. “Some 62% of financial institutions surveyed indicated first-party fraud chargebacks represent less than 10% of their total volume,” said Mattei. But the survey indicated that it is a growing issue. “More than half (57%) of financial institution executives indicated that first-party fraud grew from the first six months of 2021 to 2022,” he added.

Solving the Problem

Solving transaction confusion is easier than tackling first-party fraud, and something financial institutions can do today. “By providing additional details — like clear merchant names or logos, or even full digital receipts — this can help cardholders make better sense of their purchase history,” said Iyer.

That information needs to be clear and obvious on bank statements so that cardholders can better identify all their transactions.

“Issuers [have] been very successful in reducing dispute volumes by making more information — like clear merchant names, logos, and even digital receipts — available in digital bank channels,” said Condellire. “We’ve seen a reduction in overall disputes when more information is made available to customers. This also contributes to a reduction in call volume for ‘do not recognize’ calls into issuer call center channels.”

Fighting first-party fraud is harder and requires more data analysis and collaboration. A variety of information could be used to help confirm if a purchase was legitimate. “These data points could be about the payment device, including IP [internet protocol] address, device ID and device name, and device location. It could include customer details such as the account name or user ID, telephone number, or billing and shipping address,” said Iyer.

Collaboration between merchants and issuers will likely be part of the long-term solutions to first-party fraud. “We need to empower businesses to be able to share intelligence, and that comes from having more information to help identify good transactions sooner in the transaction process,” said Iyer.

Conclusion

The percentage of chargebacks due to first-party fraud vs. transaction confusion ranges significantly between regions and countries. Despite being a relatively small fraction of charge-back volume, first-party fraud is increasing and needs to be given the attention it deserves.

First things first, though: financial institutions need to go after the low-hanging fruit and reduce transaction confusion. This improves the customer experience and helps reduce chargebacks. It’s also likely to have other positive financial effects. Financial institutions that want to lead in the payments space will be wise to focus on reducing transaction confusion.

The post Understanding First Party Fraud Chargebacks appeared first on PaymentsJournal.

Automated Payment Reconciliations Free Time and Drive Efficiency

Payment volumes have seen a dramatic growth in the last decade, along with the number of payment methods available, the type of payment reconciliation required, and increased regulation.

In a recent webinar, Nick Botha, Global Payments Lead at AutoRek, and Steve Murphy,  Director of Commercial and Enterprise Payments at Mercator Advisory Group, discussed how automation can help businesses reconcile the gap between the front-end and middle as well as the back-office processes to stay ahead of the curve and manage the volume of payments.

Biggest Obstacles for Payment Operations Teams

Botha pointed out that as the payments space grows, there’s increased competition and increased regulation. Regulators look after the needs of the end-consumers as well as the organizations providing services.

Regulation isn’t the only obstacle payment operations teams face. Payment volumes continue to grow worldwide. Payment organizations are working to better optimize the process of payment reconciliation. They are doing this with automation and by getting rid of error-prone manual processes.

Cross-border payments also come with their own level of complexities. “With cross-border payments, there’s more complex data,” said Botha. “Data is not standardized. This creates huge havoc for the operations teams. There are time delays. Instant payments become more difficult because of the process.”

“When it comes to cross-border payment reconciliations, the structure of the reconciliation themselves must vary and change per different geography,” he continued. “Having a robust but flexible solution that resides within your middle and back office is extremely important.”   

The different elements that make up the complexities within cross-border payments include exchange rate differences, time differences, incomplete data, incorrect data entries in internal data, unpredictable charges, and fees. Although automation will not have a direct impact on time differences or exchange rate differences, what it does do is streamline mundane and time-consuming processes. It frees up more time for operations teams to analyze key data and resolve issues faster.

Operation Needs Have Evolved

Much is driving the growth in the volume of payments, including increased competition, how much e-commerce has changed amid the pandemic, and the deluge of payment methods out there.

In 2012, payment volume was low, smaller teams were the norm, and competition wasn’t as much. Today, there are more solutions for automation, more companies that have scaled in size, and more competition. And as teams become larger, more processes need to be managed so that the middle and back offices can handle what’s coming through the front-end offices.

Gaps In Efficiency and Solutions

The most common efficiency gaps organizations struggle with include risk of regulatory breaches, dependency of skilled persons, and an inflexibility to meet regulatory demands.

“You need to make sure you are partnering with the right reconciliation solution,” said Botha. “There’s a difference between a certain reconciliation tool and a tool that can handle all your data, all your processes, your workflows. So, matching what your requirements are versus the partner that you are looking to automate these processes, is an important consideration.”

Botha further emphasized that choosing the wrong partner will create more havoc down the line.

Having an all-encompassing solution makes more sense for organizations looking to simplify their processes. “There’s opportunity to reduce those actual systems that you have to integrate with,” said Murphy.

The Significance of Financial Controls and Reconciliations

According to the data presented, AutoRek shared that as many as 50% of those surveyed are using Excel for accounting. About a quarter are using an in-house system, and another quarter are using a third-party system.

Some businesses don’t feel that any of the existing solutions out there are a good fit for their organization. Therefore, they choose to build their own solution. According to Botha, the issue with that is that most in-house solutions are not equipped or flexible enough to handle industry changes. Handling the massive scale of volume can also be problematic.

Those surveyed were asked what back-office capabilities would give their organization the greatest competitive advantage. An overwhelming majority of 78% said having superior reconciliation disciplines. Roughly 11% of respondents said superior data management. The also said understanding and remaining compliant with global regulations would grant them the biggest competitive advantage.

A Look Ahead

Forward-looking companies must continue to look at their current processes and determine where the gaps in payment reconciliation are. By choosing the right partnerships, businesses will ensure they’ll be able to manage the barrage of payments to come and remain in compliance.

Learn how AutoRek’s automated platform can help payments firms with their reconciliation and operational requirements.

The post Payment Operations in 2022: Key Challenges and the Role of Automation appeared first on PaymentsJournal.

Diminishing Fraud and Risk on the ACH Network

The Automated Clearing House (ACH) has had roughly $72.6 trillion in payments flow through its network in 2021. And as payments continue to flow, fraud is also increasing.

Mitigating fraud has been an especially hot topic for ACH. In a recent webinar, Amy Morris, Senior Director for ACH Network Rules at NACHA, George Remennik, Senior Compliance Manager at Settle, Eric Greenstein, Product Manager, Compliance at Modern Treasury, and Pranav Deshpande, Head of Product Marketing at Modern Treasury, discussed how companies and their bank partners can mitigate fraud and manage risk when using ACH payments. They also offered solutions and best practices that businesses can implement to protect themselves against fraud.

“The ACH Network is thriving”, Deshpande said, “and it’s undoubtedly the most widespread electronic payments network in the U.S. From Payroll and direct deposit to newer use cases like marketplace payments and embedded finance, use the ACH Network.

This rapid growth in payment volumes, combined with diversity in payment use cases has made fraud and risk mitigation for ACH payments more important than ever before.”

NACHA’S ACH Fraud Prevention Tools and Requirements

As the governing body of the ACH Network, NACHA has requirements as to how ACH payments are initiated. The Originator—be it a company, government agency, or organization—of the ACH transaction must submit the payment through a financial institution. It’s 99% likely that an organization will not have direct access to the ACH Network.

Therefore, the organization is required to submit a file through their own financial institution or through the Originating Depository Financial Institution (ODFI), which enters that transaction into the ACH network. That ODFI is “warrantying each transaction that they submit into the network,” said Morris.

This ensures that everything is authorized and accurate. It also demonstrates that the originator has all the necessary agreements between the ODFI and the originator.Both parties must agree to abide by all the rules and regulations set forth by the NACHA operating rules.

If NACHA receives notice of a possible rules violation from another party within the network, it will approach the financial institution (ODFI). “There are rules that require originators and third parties to perform certain activities, but it is the ODFI that is warrantying that they are doing so,” said Morris

Recent Trends in ACH Fraud and Risk

As ACH fraud continues to accelerate, NACHA has stepped up its rules. “We’ve been very risk-focused over the last several years,” said Morris.

Account Validation for WEB Debits is one of the most recent rules. If a consumer account is being used for the first time, the account number must be validated.

“Micro-Entries” (or “Penny Tests”) are an important new tool for originators to use as a form of account validation. They are defined as ACH credits of less than $1 as well as offsetting ACH debits in order to verify the receiver’s account.

Fraud Prevention Best Practices for Companies and Their Bank Partners

In order to remain in compliance, companies leverage a number of payment operations and fraud systems. It’s time-consuming to integrate and manage all these tools. “We see companies that are slow to set up tools in this space, they are trying to integrate different vendors,” said Greenstein. “But this is really hard, it’s not anyone’s core competency, especially for younger companies. It takes time and resources away from their principal activities.”

Despite the ever-present threat of fraud, many financial institutions cannot protect themselves against a potential attack.

“The shortcoming of many financial institutions is that a lot of them have legacy systems in place. They have placed their compliance program on top of systems that have been around for decades,” said Remennik.

Startups are a prime target for fraudsters. Because they typically don’t have the robust investment in compliance that banks such as Citibank have. According to Remennik, it’s important for startups to remain diligent to ensure they have strong programs.

It’s also important to have well-trained and experienced staff ready to identify account takeovers. They are harder to deal with. Fraudsters can easily pass through the Know Your Customer (KYC) checks.

They are also prone to using clone websites. A transaction monitoring program will prove helpful in combating these types of fraudulent attacks and identifying anomalies in transactions, which in turn mitigates the potential loss.

The Road Ahead

Many companies are simply stitching together solutions to handle all aspects of fraud prevention. The problem with this is that it requires specialized engineering expertise and other resources. Main business operations and deliverables require these resources. For some companies, particularly startups, this makeshift solution could significantly increase the risk of violating compliance and impacting revenue.

Many fintech companies are hard at work, developing solutions that incorporate all the necessary fraud prevention capabilities, eliminating their exposure to fraudulent attacks.

The post Mitigating Fraud and Risk on the ACH Network appeared first on PaymentsJournal.

As Real-Time Payments Accelerate, Companies Need to Get Operationally Ready

Although real-time payments (RTP) are experiencing rapid growth worldwide, many financial companies lack the infrastructure necessary to take advantage of this growing trend. But it’s less about capability, and more about “operational readiness.” In order to achieve operational readiness, businesses must have both their front-end and back-office systems working in unison to process payments instantly. 

During a recent webinar, PaymentsJournal sat down with Casey Scheer, Director of Marketing at BHMI, Cheryl Gurz, RTP Product Manager at The Clearing House, and Sarah Grotta, Director of Debit and Alternative Products at Mercator Advisory Group, to discuss the state of real-time payments—the latest trends, the challenges that companies are facing, and how they can be better prepared to accept RTP. 

Where Real-Time Payments Currently Stand 

Toward the end of 2021, Mercator released a survey of more than 3,000 consumers about their familiarity and experience with real-time payments. A large share of respondents (54.5%) said they have never used a service that allowed fast money transfers.

That said, nearly half of respondents experienced real-time payments to some extent. Roughly 21.8% said they’ve used a person-to-person (P2P) service such as Zelle to quickly transfer money, while slightly fewer respondents (19.3%) had used a P2P app to send funds to a person in another country. The various use cases outlined in the survey, including the ability to pay a bill quickly, as well as get a refund back immediately, show that there’s still a lot of opportunity for education.

Developing Trends in RTP 

A big driver of real-time payments use is that funds are received instantly, or in some cases, within a few minutes. And nearly three-quarters of consumers surveyed rated having the ability to pay their bills instantly at least somewhat important.

“This is a use case where we’ve seen some recent announcements from financial institutions developing solutions around bill pay, and we’re also seeing some of the fintech providers of bill pay platforms beginning to add faster real-time payment options,” said Mercator’s Grotta. “That’s spurring a lot of growth. Account-to-account transfers are [also important] , and sometimes this is actually a bill payment transaction itself because consumers may need to consolidate their balances to ensure that they have enough funds to cover an automatic bill pay.”

Grotta also shared a forecast for The Clearing House RTP Network during the webinar, based on data seen from Mercator’s primary research studies around real-time payments, as well as growth seen from other payment types like debit push payments and immediate P2P transactions. “We’ve developed this particular forecast, and in some ways, we actually consider this a relatively modest initial growth period because we realized that launching a brand-new payment rail is not something that happens overnight,” said Grotta. “But we are in fact forecasting over the next couple of years that the market is really going to be entering a period of steep growth.”

Difficulties Companies Face with RTP 

One of the obstacles to RTP readiness is back-office systems.

“The front office is kind of like getting a brand-new Tesla. You’re taking a 100-mile journey and the first 99 miles, it’s new, agile, and fast,” Scheer said. “However, in the last mile of your journey, the back office is like getting into a horse-drawn buggy, and it’s slow, outdated, and not agile. It causes a huge traffic jam.”  

According to Scheer, this bottleneck effect occurs when organizations have fast processing speeds on the front end and slow processing speeds in the back office.  Legacy back-office systems weren’t designed to support instant payments. “These systems were built decades ago, and because of that, they’re batch-oriented and not designed to support real-time payments,” she said.

Another major challenge is most back‑office ecosystems are comprised of multiple, disparate systems that lack interoperability and cannot provide a real-time enterprise view across all payments data.  As a result, companies are bogged down with manually intensive procedures to perform back-office functions such as transaction research, reconciliation, and disputes management. 

A modern back-office ecosystem is capable of processing any transaction regardless of the payment type or payment source and providing real-time access to consolidated payments data.  This includes supporting new payment messaging standards such as ISO 20022.  However, modernizing an existing home-grown back‑office system is no easy task. It requires extensive software development time, talent, and effort.

Today, many organizations recognize the need for a modern payments back office that is fast, agile and resilient.  They are looking for a back‑office system that can accommodate new faster payment methods and adapt as their needs change.

How to Get RTP Ready 

According to The Clearing House’s Gurz, education is key to comprehending how RTP payments can best fit within a business. There are plenty of resources available to educate companies about RTP, including public websites and podcasts.

The next step is connectivity. Businesses must have a way to receive payments from their banks, and this requires some technical prowess. That would mean implementing batch to batch integrations, uploading BI files, or implementing APIs. It comes down to establishing which way works best within your business.  

“One thing about real-time payments is that we like to call it precision payments, because it only takes 15 seconds,” said Gurz. “If I need to have a payment today due to my supplier by 5:00 PM, I can make that payment at 4:59 PM. It really puts new focus on liquidity management and your cash flow because you can schedule to the last minute.”  

Gurz emphasized that real-time payments should provide a benefit, not only to the workflow and cash flow of a business, but also to customers.  

“Don’t just look at your integration with your bank,” she said. “Make your customer service better.”

“Lastly, I suggest that businesses looking to become operationally ready use real-time payments to add benefit,” she said. “Don’t look at this as a lift and shift activity. And don’t look and say, ‘Oh, I’m using ACH, now let me move them all to real-time payments.’ That’s not why you’re doing this. You now have a toolkit with a new tool in there and this tool could be for your emergency payments. This tool can be for service issues. This tool should be used to solve pain points which your current payment types are not good enough for.”

Conclusion 

As adoption of real-time payments continues to accelerate, businesses need to become more operationally ready. Educating their staff about real-time payments is key, as is establishing connectivity, as Gurz pointed out.

Modernizing legacy back-office systems is also essential if an organization wishes to extend the full benefit of real-time payments to its clients. Today, most organizations, even those currently sending and receiving payments via the RTP network, have a bottleneck in the back office. No matter how fast the authorization occurs in the front end, a payment isn’t complete until funds are cleared and settled.

To be operationally ready for real-time payments, organizations will need to embrace transformation in the back office and either buy or build a system capable of processing payments in real time and adapting to future changes in the industry.

The post Is Your Company Operationally Ready for Real-Time Payments? appeared first on PaymentsJournal.

The best bill is no bill at all. But if you must pay bills, you want the process to be clear, fast, and easy. Getting a real-time payment confirmation would be great as well. 

As bill pay technology has become more sophisticated, those are just the kind of features consumers have come to expect.

BillGO, a fintech focused on becoming America’s bill pay platform, has confirmed these findings thanks to two nationwide studies it commissioned in  2020 and 2021.

To learn more about this research,  PaymentsJournal sat down with Daniel Hawtof, SVP of Bill Pay Product at BillGO, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service for Mercator Advisory Group.

Overview of Bill Pay

Consumers have anxiety about bill payments and need to know that payments are going to get to the biller on time. They know that if they don’t pay their bills on time, late fees, penalties and damage to their credit scores are all very real possibilities. 

“According to FICO, if a person misses a single bill, it can trigger as much as [a] 180-point drop in their credit score,” Hawtof said.

This means that someone who has pretty good credit who misses a single bill can end up labeled as a  high credit risk. Consumers know this and want to avoid tardy payments. Banks and fintechs are trying to help their customers make timely  payments, but to do so, they need to innovate beyond the legacy bill pay platforms that still play an oversized role in many organizations.

For instance, in an ideal bill pay system, the FI could forecast consumers’ cash flow based upon activity in their accounts.

“It would really help to alert the consumer when they might run into a cash flow issue and be at risk of making a late bill payment,” Grotta said. “And I think if we can come to those kinds of solutions, we’re really going to pull down consumers’ anxiety level.”

Bill Pay Adoption

Years ago, banks were the primary place consumers went to pay their bills. However, in recent  years, banks have been losing that bill pay share as consumers elected to pay billers directly. However, the tide may be turning again as Now about half of consumers use their bank to pay some of their bills online.

A core issue in bill pay is organizing all the websites and passwords necessary to do it. Consumers often must create spreadsheets to consolidate and forecast their bills.

“According to our research, consolidation is something that users really want,” Hawtof said. “And there’s a great opportunity for banks to work with innovative companies to bring all of that information together.”

Grotta agreed, noting that the best modern bill pay experiences she has witnessed in the marketplace are ones where financial institutions are partnering in the industry.

Incentives to Switch Bill Pay Methods

Inertia is king. Absent incentives, most consumers are unlikely to change their bill pay methods.

To switch, companies have to provide real benefits, such as scheduling tools, real-time payment abilities, rapid payment confirmation, and flexibility of payment type.

One incentive to switch bill pay systems could be microloans. Hawtof said that this is backed up by BillGO’s research. “In our studies,we asked consumers about microloans, and about 20% [said] they would be interested in getting a microloan to help them bridge the gap between payday and bill due dates,” Hawtof said.

Historically, payday loans have filled that gap. But payday loans often charge exorbitant interest rates, have fees, and can sometimes be predatory.

Banks has a trusted relationship with their consumers and could offer microloans to support them. This is a prime concern not just due to the current economic situation, but also because of the scrutiny that overdraft and NSF fees are receiving right now.

“Financial institutions are trying to figure out how to help consumers but at the same time stay away from really heavy overdraft fees as well,” Grotta said. “So, I think having a microloan service sort of interwoven with bill pay makes a ton of sense.”

Indeed, a microloan may offer a better interest rate than a credit card company.

Managing Subscriptions, With a Subscription Manager

Once a customer has put a credit card on file for a given website, if something changes, it is a headache.

Hawtof elaborated: “What if you want to use a different card, or you want to you have to update a card, because let’s say the expiration date changed on your credit card. First, you have to figure out, ‘what did I subscribe to? What are all my subscriptions so that I can go change that credit card?’ And then you have to log in to each one of those and make a change.”

There are solutions that help manage all customer subscriptions and push out new card info to all the subscription services at the same time.

“Say I want to change my HBO, my Netflix, and my wine.com subscription in one fell swoop,” Hawtof said. “Once they’ve given permission to do, we have credentials to be able to go in and update the credit card on behalf of a consumer, saving them time.”

Grotta noted that Mercator research shows  not only are consumers interested in having the ability to have bills paid automatically, but they also want the flexibility to use a debit card, credit card, and checks.

“Consumers are looking for the flexibility to manage those payments on their terms with the payment product that meets their need at that particular instance,” Grotta said

Furthermore, with the advent of real-time and faster payments, consumers now expect more of their payments to be instant, or at least processed within the same day.

According to the BillGO studies, more than 30% of consumers think that when they pay a bill, it should be instant. Hawtof noted that this contrasts with public opinion from even two years ago. “Fewer consumers really felt that instant payments were necessary. But with the advent of things like P2P transactions that are conducted instantly, it’s now becoming an expectation.”

The post On-demand Webinar: Winning the Battle for Bill Pay appeared first on PaymentsJournal.

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Similar to what has been happening in the consumer realm over the past decade, traditional financial institutions have seen a growing number of small-to-medium sized businesses (SMBs) flock to fintechs and digital neobanks to meet many of their financial needs. One major reason for this exodus is that the legacy technology infrastructure inherent in many banks and other traditional financial providers does not allow for quick and easy development of new digital products and services.

How this problem can be overcome was part of a broader discussion about what kind of technology SMBs want when it comes to managing their finances in a recent PaymentsJournal webinar titled “SMB Banking Disruption and Innovation: What SMBs want, how their needs shift and how to win using a customer first approach.” The webinar featured a lively discussion between Brian Riley, Director of Credit Advisory Services at Mercator Advisory Group, and Scott Johnson, the Head of Strategic Expansion at Galileo Financial Technologies, an API-based card issuing and payments platform.

SMBs Look Beyond Traditional Providers

A major part of the discussion was around how SMBs are looking beyond the traditional financial providers to meet their banking and payments needs. One sobering statistic that was shared, which came from a survey of small businesses done by consulting firm 11:FS, is that only 18% of small businesses say they “completely agree” that banks are providing the services they need to effectively run the financial side of their business.

“Overall, SMBs are not happy with the services that banks provide,” said Johnson, adding that with about 33 million small businesses in the U.S., this is a very large and potentially lucrative market.

SMBs are increasingly looking for one single platform to manage their entire financial lives; currently many small businesses use multiple different providers for different financial products and services.

“Businesses want to be able to manage their cash flows and make day-to-day business decisions based upon their entire financial health,” said Johnson. “And then they want that lending component, or a credit component as needed to help them build their businesses.”

Both panelists noted that this trend mirrors what is happening in consumer banking, where many are turning to digital-first upstarts for services like BNPL, budgeting, and embedded finance that banks do not offer. In one poll shared during the webinar, nearly 50% of consumers reported they would use an internet or wireless provider, or a streaming service, for financial needs. About as many said they would use a national retailer or even their employer for financial services.

 “Small business owners are consumers too, and they want those same types of experiences they’ve come to expect from challenger neobanks,” said Johnson. Small businesses also want flexible access to credit when they need it, mirroring the rising popularity of BNPL platforms among consumers.

The Rise of Embedded Finance

One area of particular interest for small businesses is embedded finance and embedded payments. Nearly half of small businesses even said they would be willing to pay a price premium to a digital provider for such services.

Riley noted how the embedded payments experience in a service such as Uber is seamless and intuitive for the user, who doesn’t even have to think about the payment.

“Embedded payments are somewhat of an elusive word, and you probably already experienced them without even knowing it, whether you’re arranging a car service, [or] really [doing] anything in the gig economy,” said Riley.

Small businesses want to be able to offer these embedded experiences to their customers but are often unable to since their banking provider may not offer these digital capabilities.

Johnson mentioned Toast – a point-of-sale hardware provider mostly serving the restaurant industry – as an example of a company doing a good job providing embedded finance to its business clientele.

“They do an amazing job of not only providing an incredible experience for the restaurant to be able to manage everything they need to at the restaurant, but they’re able to now integrate payments holistically into that experience,” he added. “They are able to get so close to their customer that they can even offer a lending product to a restaurant owner because they’re seeing how many sandwiches were sold.”

Johnson continued: “That’s why now they’ve embedded everything within their platform and their product offering. And that’s where we’re seeing these types of really cool embedded finance solutions start to grow, because, again, these solutions are so tied in you don’t even think about it.”

Ultimately, small business owners want to manage the whole continuum of their financial lives – from lending and savings needs, to asset protection to running the business and embedded finance – all from one provider.

How Banks can Overcome Legacy Systems

Banks are well positioned to be that sole provider, since they have a long history with their business customers and are generally seen as more trusted when compared to digital startups. But banks can struggle to offer the embedded digital services their small business clients want due to legacy infrastructure.

“A lot of the infrastructure and plumbing has been around for nearly 40 years,” said Riley, adding that the different data silos internally at banks make it difficult to innovate.

“I think of the days when I was at [a Big Four Bank] a couple of decades ago, and it was easier to get information from a credit bureau about what other relationships the customer had than to look at one internal system that passed through all those silos,” he said.

Ripping and replacing entire core systems is a risky and cost prohibitive solution to this problem for the vast majority of banks. But they can innovate despite legacy infrastructure by adopting an open API infrastructure, according to Johnson. APIs can be layered on top of legacy systems and be used to integrate with various third parties to quickly deploy new products and services. This is especially important considering the pace of digital innovation.

“What’s sexy 3-4 years ago is just OK now,” said Johnson. “But with an open API approach, when the next great feature comes along you can respond quickly without needing a massive tech rebuild or a massive reengineering effort.”

Johnson noted that digital habits that were beginning to be adopted by consumers and small businesses in recent years were accelerated during the Covid-19 pandemic. It is now table stakes for banks to offer the digital products their customers want.

Ultimately, banks don’t have to transform overnight, but can use an open API architecture to begin to meet the digital needs of their SMB clients.

“It doesn’t mean that you have to be all things to all people on day one,” said Johnson. “But I think you need to have this vision of how you grow your product over time.”

Learn More About the Future of Banking for SMBs

In the recent webinar hosted by PaymentsJournal, Johnson and Riley discuss several other key details of SMB banking, including:

• Data on trending interest in banking services from non-financial companies
• Insights into the growth of the embedded finance market
• Specific small business banking use cases

The post On-demand Webinar: What SMBs Want From Digital Financial Experience appeared first on PaymentsJournal.

Nearly every major bank in the United States traces its roots back at least a century or more. Financial institutions have historically been dominant in the payments space, but in recent years, upstart fintechs and other third-party banking service providers have shaken up the industry. While big banks have the advantage of name-brand recognition and legacy reputations, it will take more than an appeal to nostalgia to win over new customers – banks must reinforce their stake in the industry with new technology, strong infrastructure, and smart data management.

To discuss key issues concerning how banks can keep up with current trends (and even be trendsetters themselves), PaymentsJournal hosted a recent webinar titled How To Build A Better Bank With A Distributed Infrastructure. In the webinar, expert speakers Lance Homer, Global Head of Digital Payments and Banking at Equinix; Tyler Pichach, Executive Director of Worldwide Financial Services at Microsoft; and Tim Sloane, Vice President of Payments Innovation at Mercator Advisory Group, offered additional insight into specific steps banks should take to qualitatively separate themselves from the pack.

Differentiation with digital infrastructure

Any modern bank hoping to compete in the industry will be working with loads of data and should ideally have a robust and diversified digital infrastructure capable of managing all that information. Sloane identified four main points to remember about how digital infrastructure must operate:

• Digital infrastructure will need to support business critical apps, running at scale, across the world.
• Complex value chains will develop; secure, low latency data flows will be needed.
• These value chains will contain a mix of public cloud, private cloud, hybrid, data-centered, and on-premises architectures.
• Interconnection between parties will be critical.

What is required for banks to get up to speed? The first step is simply to become comfortable evolving out of archaic systems. “Legacy banking platforms have made banks successful for many years,” said Homer. “But at some point in time, as you continue to put more and more products on top of it, it becomes very cumbersome and difficult to be agile in today’s environment that demands things happen at cloud speed.”

Legacy banking infrastructure is often centralized, siloed, rigid, and slow. Equinix, an industry leader in digital infrastructure with over 220 data centers across 63 metros and 26 countries, partners with cloud providers like Microsoft Azure to bring banking infrastructure into the future. Modern banking architecture is distributed to the edge with low latency, interconnected to partner ecosystems, and agile and elastic with cloud services. “In the last 18 months, we’ve really started to see a shift towards mass adoption of a hybrid cloud infrastructure,” said Homer.

Begin with the end in mind

The switch to hybrid cloud, hyperconnected, system of intelligence from a fully on-premises siloed system of record banking technology stack will not happen overnight. Banking modernization projects are costly in both time and money to undertake. Moreover, once they are built, they are often long-lasting decisions. Therefore, banks should begin with the end in mind before choosing a colocation provider and a cloud provider who can provide them the agility, reliability, and reach, and for their modernized banking stack. Critical end state considerations could include ability to connect to current and future partners in clouds other than your own, the ability to build edge deployments for aggregating branch connectivity or end user traffic, latency between on-prem and cloud applications, how your data will be stored for your own access (AI algos) and 3^rd party access (Open Banking) and the ability to take advantage of emerging technology trends. “Make sure your ladder is leaning against the right wall before you start climbing,” advises Homer.

Partner ecosystems are critical

There are a variety of characteristics that are crucial for building effective digital infrastructure: resiliency, compatibility across several platforms, scalability, security, sustainability, not to mention speed, accessibility, and adaptability that caters to the personalized needs of customers. Those are quite a lot of concerns for even the biggest banks to tackle on their own. How can banks ensure that their infrastructure meets all of their needs? By prioritizing partnerships with other organizations, service providers, and ecosystems.

“As this infrastructure is leaving the banks and data centers, they’re embracing multiple partners in that technology stack and having more vendors offer different parts of that stack to them,” Homer explained. “That’s becoming very critical in order to make sure that you have connectivity to them so that there’s a seamless digital supply chain for the end customer experience.” Banks can further differentiate themselves by using integrating API middleware suppliers, reliable networks, fraud services providers, and even social media platforms.

Banks need to find creative solutions to deal with the rise of fintechs and other businesses that can offer banking adjacent services without the same regulatory requirements. Companies like Google, Amazon, Square, and Apple are all migrating into the payments space, and using existing payment rails through banks as scaffolding. “As you flash forward over the next 5-10 years, how do banks compete with that?” asked Pichach. “You have to be the ones that are worried about the regulatory nature of any investments to maintain the regulations that continue to increase.” Building strong relationships with other financial institutions and vendors can help banks compete with banking as a service (BaaS) that meets customer needs.

It’s all about the data

Centralized networks used to be one of the most powerful tools in a bank’s arsenal. “Those networks held incredible power because they had those physical connections,” Sloane explained. “But what’s happening now is networks are becoming more common, more reliable, more secure. And we see that power shifting to the data.” Data collection is now critical to banking success, and distributed infrastructure must support the fast, easy, and safe access of that data. This, in turn, will lead to better customer relationships.

Banks have an incredible opportunity to build infrastructure that allows for real-time access to information that will help them serve their customers. “Banks sit on all of my transactional data,” said Homer. “They know where I shop, they know how much I spend on a monthly basis.” Rarely, though, do the banks reach out to provide their clients insight into spending patterns, or offer them data-driven solutions. “I think consumers are looking for that,” Homer continued. “The capability to do that personalization begins with making sure you are building infrastructure that can access the data.”

Another potential source of monetizable data comes from AI / ML (artificial intelligence / machine learning). Microsoft Azure has AI / ML capabilities, and that personalization tool can connect with Equinix on-prem and colocation data facilities. “That’s the model we’re seeing going forward,” said Homer. “The days of bringing everything back to a single centralized location and creating this giant data lake that nobody has access to are over. That’s stagnant.”

This infrastructure can build what Pichach refers to as “super hyper personalization” by putting data into a “secure enclave.” Every participant has encrypted data that is untouchable by unauthorized parties, and some of the data is on premises, while some is in the cloud. “That all gets funneled together as part of this confidential computing, which is a public cloud service from Azure,” Pichach clarified. Then automated systems from the bank can create a story that connects customers’ purchases and life events with broader economic information—without exposing private information. “Making all of that happen in a hybrid world, across multiple banks and multiple merchants is something that I think can really transform how retail banking works and is how merchants will survive in the future,” said Pichach.

Learn more about how to approach banking infrastructure

In the recent webinar hosted by PaymentsJournal, Homer, Pichach, and Sloane discuss several additional nuances of distributed infrastructure, including:

• Specific practical examples of where digital infrastructure can be used
• How distributed infrastructure can generate revenue
• Helpful steps and common missteps for renovating core banking systems

The post On-demand Webinar – Distributed Infrastructure: The Bridge to Better Banking appeared first on PaymentsJournal.

With many developing use cases and businesses increasingly demanding access to real-time payments, financial institutions risk losing loyal customers if they do not offer real-time payments as soon as possible. This sentiment is reflected in the rapid adoption and connectivity to The Clearing House’s (TCH) RTP^® network and interest in the Federal Reserve’s upcoming FedNow^TM Service.

However, when it comes to the when and how of real-time payments implementation, there is no standard template or approach. Each financial institution must consider several factors, including their organizational strategy and customer base, when developing an implementation plan.

To offer insight into recent developments in the real-time payments market and what a successful real-time payments implementation strategy looks like, PaymentsJournal recently hosted a webinar panel discussion titled “Real Time Payments: A Practical Guide to Implementation.”

The panel consisted of expert speakers Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group; Keith Gray, VP of RTP Strategic Partnerships at The Clearing House; Carrie Blankenship, Director of Product Management, Instant and Emerging Payments at Fiserv; and Chaula Pandya, SVP and CTO at Community Bank of the Bay.

The U.S. real-time payments market

Real-time, near real-time, and faster payments have been gaining traction in the United States in recent years. Faster payment examples include debit networks’ push payments, which have real-time clearing and next day settlement, as well as Same Day ACH. An example of near real-time payments is Early Warning’s Zelle. While Zelle does have the option for real-time clearing through The Clearing House’s RTP® network, the majority of settlement today is delayed and completed via debit card rails or ACH. 

The two main real-time payment rails in the U.S. are The Clearing House RTP^® network, which launched in 2017, and the Federal Reserve’s anticipated FedNow^TM Service , which is slated to go live in 2023. “Both of these rails are real-time clearing and settlement systems, meaning that within seconds, payments can be sent and received with finality, and the systems are always on 24 hours a day, 365 days a year,” explained Murphy.

Real-time payments deliver real value to banks

According to Gray, the promise of the RTP^® network from the beginning has not only been to make payments faster, but also to make them smarter and safer. “A lot of the capabilities of the RTP^® network are not only around the immediate part of it, but also those enhanced capabilities that have to do with smarter and safer payments,” he said.

One of the main differentiators of the network is that it is a push-payment model. This means that the sender needs to push money into the recipient’s account, rather than the recipient being able to pull money out of the sender’s account. This creates complete visibility on both sides of the payment transaction. “The payment is certain and those funds are available immediately. Those capabilities—the immediacy, the certainty, the immediate clearing and settlement—are what I call the base level components of the network,” said Gray.

Enhanced RTP network capabilities include use cases such as account to account (A2A) transfers, loan funding, gig economy, B2B payments, payroll, merchant funding, title companies, wallets, insurance claims, and cash concentration. Additional use cases and applications are added regularly, exemplifying why financial institutions are keen to connect  to the RTP network.

“We add banks and credit unions every week onto the network. That number is actually accelerating as we move forward. Companies like Fiserv have different programs and products in place that really make it easy to have them join the RTP network, especially on the receiving side… We’ve really done what we can from a network standpoint to make onboarding onto the RTP network a very straightforward process,” explained Gray.

The importance of implementing real-time payments

Financial institutions of all sizes need to make real-time payments a priority. “The mission that we have at Fiserv is that we enable banks and credit unions  to be able to deliver instant payments across their enterprise for all use cases and all networks,” said Carrie Blankenship.

Of course, each financial institution has its own unique set of customers and needs. Recognizing this, Fiserv offers more than one way for financial institutions to incorporate real time payments into their product offerings. For starters, its  Enterprise Payments Platform is a full scale and traditional payments hub that delivers high performance, real-time payments processing multiple payment rails, including RTP. For organizations that do not have a strategic intent of  deploying a full-fledged payments hub, Fiserv Payments Exchange offers a direct gateway to the RTP® network with faster and more affordable onboarding. Payments Exchange will also connect to the FedNow Service when ready. “Our advice to financial institutions is to start with Receive now on RTP®, familiarize internal resources with solution while volumes are low and get ready for future phases”, said Blankenship.

The California-based Community Bank of the Bay learned the importance of real-time payment capabilities firsthand during the pandemic. “During the COVID-19 pandemic, U.S. banks offered the SBA Paycheck Protection Program [PPP] to businesses in our community, and banks could have used after hours and over the weekend loan funding options. But we were not part of The Clearing House, and we had not joined the RTP network at the time,” said Pandya.

This translated to the bank being unable to fund PPP loans outside of traditional wire transfer hours. “We also learned another lesson during the PPP era, and that was when the state of California decided to fund grants to small businesses. We did not have partnerships with the right fintech company, and what that did is [prevent] our clients from receiving their grants to their accounts here at Community Bank of the Bay,” she added. 

This lack of functionality meant that customers had to go through their accounts at other banks that had already chosen the right fintech partners. The takeaway? “It is important to stay on top of what fintechs are innovating, and financial institutions partnering with the right technology partner to stay compatible with product offerings is going to become the standard. Integration with fintechs  is totally unavoidable for banks,” concluded Pandya.

To learn more about how banks and credit unions can implement real-time payments functionality, please fill out the form below to access the complimentary PaymentsJournal webinar, “Real Time Payments: A Practical Guide to Implementation.”

The post On-demand Webinar – Real Time Payments: A Practical Guide to Implementation appeared first on PaymentsJournal.

Application program interfaces, or APIs, have been in use for decades and are present in any system where modern technology is used. The payments industry is no exception, and various fintechs and third-party providers are racing to offer solutions for financial institutions to integrate newer and better API platforms into their business model. The speed with which technology and the industry are advancing is unprecedented.  How can corporates keep pace with the market and adopt an API-first approach in the payments space that will benefit both companies and their next generation of end-users?

To answer these questions and discuss other key issues concerning APIs, PaymentsJournal hosted a recent webinar titled APIs – Driving the Next Wave of Payments Innovation. In the webinar, expert speakers Soumya Johar, Director of Strategic Alliances and Partnerships at Opus Consulting Solutions; Karl Mattson, Chief Information Security Officer at Noname Security; Jordan Esbin, Head of API and Developer Experience Products at FIS; Gunnar Stoa, Distinguished Solution Engineer at Mulesoft; and Tim Sloane, VP of Payments Innovation at Mercator Advisory Group, offered additional insight into how to build and integrate effective APIs.

“Integration is the need of the hour”

The payments industry is in the midst of a massive transformation. On the front end, consumers expect more personal interactions, and on the back end, new alternative payment solutions are cropping up left and right—faster payments, cryptocurrencies, Venmo, just to name a few. Within financial institutions, business managers are responsible for finding solutions to every new problem, but they will often differentiate their efforts towards their specialized business areas. This inevitably creates data silos, where, for example, one person will be responsible for core banking, and another will be responsible for digital channels, and yet another for fraud prevention.

“What happened over time,” Sloane noted, “was that we saw a tremendous focus on doing data integration and analytics to be able to share data that originated in one of the silos with all the other silos that could benefit from having access to that data.” When data is easily shareable, businesses have a more complete picture of their operations, which leads to better strategy decisions. “What that doesn’t do,” Sloane qualified, “is take care of integrations that are necessary and critical for functions to be used across the silos.”

The solution? Centralized API management platforms, which will simplify integrations, improve data sharing, and better manage the connections businesses make with their partners. “With embedded finances,” Esbin added, “we see this as being highly verticalized.” Vertical integration leads to higher transparency and better outcomes for everyone. Esbin summarized how FIS sees five core foundational pieces of API innovation: security, data insights, simplicity, as-a-service, and integration flexibility.

One of the key problems with integrating APIs is that there are so many new options for companies to choose from. “They’re oftentimes very industry-specific,” said Stoa. Organizations naturally have a strong desire for effective solutions that can be executed at great speed. “It’s as easy as just saying yes to a web form or signing up for a new system,” Stoa continued.  “But what has happened in doing so, is that we now actually see this proliferation of systems of data being created.” IT today spends 80% of its time integrating, not innovating, and traditional integration approaches can’t keep up. By rolling out new functionality fast, companies inadvertently create a requirement to leverage that information to integrate disparate systems together—particularly in a way that is reusable in the future.

APIs should be highly secure, regularized, and customer-centric

APIs were the target of 40% of all web attacks, according to Gartner research, and Gartner expects API attacks to compose the single greatest cyberattack type next year. “The API security posture itself, perhaps not surprisingly, sometimes lags behind our ability on the business and technology sides to adopt these technologies,” said Mattson. He outlined Noname’s four security protection principles: discover, analyze, remediate, test.

“An API security misconfiguration, if publicly exposed, may be a singular failure point that creates a significant downstream effect,” Mattson elaborated. If, for example, an API is developed for internal use and then years later exposed for public consumption, the API design expectations would not apply to the new paradigm and would both be ineffective in meeting the needs of the consumer and act as a direct line into data breaches.

In order to protect against attack vulnerabilities, Noname conducts regular analysis and testing of its APIs. “Most of us who have worked with APIs before probably have been accustomed to penetration testing APIs, which is fantastically effective,” said Mattson. “However, when we’re talking about an API footprint that may, in many organizations, come to thousands and even tens of thousands… manual testing efforts towards APIs become very difficult to scale.” As a result, Noname integrates with public cloud services to allow a vantage point into API traffic as it occurs, balanced with behavioral analysis alongside continuous and automatic analysis and detection, remediation, and testing. API security assessments should conform to the contours of the organization, rather than the organization having to conform to the contours of yet another tool.

The consumer, however, is ultimately the center of the payments universe. “As you start maturing in your API journey, you start to look at APIs like a product,” Johar emphasized. Consumers have more options than ever, between digital wallets, RTP (real-time payments), account-to-account transfers, contactless payments, and more. To meet the needs of the consumer, some structure governing API reusability will eventually push innovation and enable new services to be offered to clients. “Innovation and speed need to be balanced with all the strict regulations and laws both at a global and local level, while at the same time managing intricate relationships between the partners. Opus’ payments API orchestration framework—Paysemble^TM, is our homegrown IP that can help clients accelerate their API-led transformation journey so they can be on the leading edge of innovation.” Johar explained.

APIs, properly utilized, can even be monetized—by consolidating and integrating data, leading to a better view of each customer and which holistic solutions will work for them. However, the future of APIs may look quite different depending on where you live. In the EU, payments are governed by PSD2 (Revised Payment Services Directive), which outlines rules for the purpose of integrating and protecting the European payments market. The U.S. has no such government mandate. “As a result,” said Sloane, “we’ve seen [U.S. financial institutions] driven by business opportunity… The U.S. has kind of taken the lead in innovation around API usage.” Johar added: “Europe is leading by five years as compared to the U.S. in terms of standardization, and the U.S. is leading by five years compared to Europe in terms of innovation.”

Learn more about how to approach APIs

In the recent webinar hosted by PaymentsJournal, Johar, Mattson, Esbin, Stoa, and Sloane discuss several additional nuances of API innovation, including:

• Decoupling complex legacy systems and new systems to create robust APIs.
• Opus and Mulesoft’s partnership around Paysemble^TM APIs.
• How to decide which APIs to prioritize.
• How APIs yield speed and flexibility for next-gen payment platforms.

The post On-demand Webinar: APIs – Driving the Next Wave of Payments Innovation appeared first on PaymentsJournal.